RCMA Asia Pte Ltd v Sun Electric Power Pte Ltd (Energy Market Authority of Singapore, non-party)

• Judge: Tan Siong Thye J
• Judgment Date: 30 September 2020
• Neutral Citation: [2020] SGHC 205
• Citation: [2020] SGHC 205
• Court: High Court (Singapore)
• Published date: 07 October 2020
• Docket Number: Companies Winding Up No 393 of 2019
• Plaintiff Counsel: Mohammed Reza s/o Mohammed Riaz, Kwek Yuan Justin and Victoria Katerina Jones (JWS Asia Law Corporation)
• Defendant Counsel: Lim Chee San (TanLim Partnership),The non-party absent.
• Subject Matter: Insolvency Law,Winding up,Winding-up order
• Hearing Date: 14 August 2020,07 September 2020

Tan Siong Thye J: Introduction

The defendant, Sun Electric Power Pte Ltd (“SEPPL”), is a Singapore-incorporated company engaged in the transmission, distribution and sale of electricity. SEPPL is wholly owned by Sun Electric (Singapore) Pte Ltd (“SESPL”), which is 99.9% owned by Sun Electric Pte Ltd (“SEPL”). Mr Matthew Peloso (“Mr Peloso”) is the sole director of SEPPL and a 95% shareholder of SEPL.¹ The plaintiff, RCMA Asia Pte Ltd (“RCMA”), is a Singapore-incorporated company in the business of trading energy and other commodities.²

On 18 December 2019, RCMA applied for SEPPL to be wound up. The Energy Market Authority of Singapore was made a non-party to the application pursuant to s 29(8) of the Electricity Act (Cap 89A, 2002 Rev Ed). However, it was not present at the hearing of the application.

On 7 September 2020, I granted RCMA’s application and ordered that SEPPL be wound up. On 9 September 2020, SEPPL filed a Notice of Appeal against my decision. I shall now set out the reasons for my decision.

I shall first deal briefly with Suit No 191 of 2018 (“Suit 191”) in which RCMA commenced an action on 22 February 2018 to claim two sums with an aggregate of $7,466,668.01 from SEPPL. SEPPL has a counterclaim in Suit 191 for, amongst other things, liquidated damages of $1m. Suit 191 was relevant to RCMA’s application to wind up SEPPL as RCMA argued that it was a contingent or prospective creditor of SEPPL under s 253(1)(b) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Companies Act”) pursuant to its claim in Suit 191.

The background facts Suit 191 and the Injunction

SEPPL was a licensee and participant in a scheme, known as the “Forward Sales Contract Scheme”, introduced by the Energy Market Authority of Singapore. Under this scheme, SEPPL was required to carry out certain market making obligations in the electricity futures market in respect of a volume of futures trade in return for incentive payments by SP Services Ltd. Subsequently, RCMA and SEPPL entered into an agreement for RCMA to assume SEPPL’s market making obligations in exchange for a 70% share of all the incentive payments received by SEPPL from SP Services Ltd (“the Agreement”).³

On 22 February 2018, RCMA commenced Suit 191, claiming a total sum of $7,466,668.01 against SEPPL. This amount comprised (a) the sum of $6,533,333.52, being RCMA’s purported 70% share of the incentive payments; and (b) the sum of $933,334.49, which related to a prepayment loan given by RCMA to SEPPL.⁴ At the time of the hearing of this application, the hearing of Suit 191 was pending.⁵

On 22 February 2018, RCMA applied for an ex parte interim injunction against SEPPL. The application was heard on 26 February 2018, where the court ordered that the application be heard on an inter partes basis. Pending the disposal of the inter partes hearing, the court granted RCMA an interim injunction restraining SEPPL, its directors, officers, employees, and/or agents from disposing, dealing with, or diminishing RCMA’s 70% share of the incentive payments received by SEPPL in respect of market making trades taken on by RCMA prior to 26 February 2018.⁶ On 11 May 2018, having heard parties’ submissions, the court granted RCMA an interim injunction (“the Injunction”), pending the final determination of Suit 191, restraining SEPPL, its directors, officers, employees, and/or agents from disposing, dealing with, or diminishing the value of RCMA’s 70% share of the incentive payments, including those to be received by SEPPL, in the amount of $6,533,333.52 (“the Funds”). This was on the condition that RCMA meet its obligations under the Agreement.⁷

The performance of these obligations was completed by RCMA in July 2018, following which the Funds were received by SEPPL in its Oversea-Chinese Banking Corp Ltd Bank account (“OCBC Account”).⁸

Diminishing of the Funds Withdrawals by Mr Peloso

On 24 September 2018, Mr Peloso withdrew $1.5m from SEPPL’s OCBC Account. This sum was used to extend a loan to Sun Electric Energy Assets Pte Ltd (“SEEAPL”), a company wholly owned by SESPL and therefore also under Mr Peloso’s control. SEEAPL made a partial repayment of $1.2m in respect of this loan, which was remitted to the OCBC Account. The outstanding amount of $300,000 was purportedly set off against moneys owed by SEPPL to SEEAPL.⁹

On 27 November 2018, 3 December 2018 and 17 December 2018, Mr Peloso made three further transfers totalling $6,091,555.39 from the OCBC Account to SEPPL’s DBS Bank Ltd account (“DBS Account”).¹⁰

Garnishment of the Funds

On 8 January 2019, a UAE-incorporated company, Kashish Worldwide FZE (“Kashish”), commenced a suit in Singapore against SEPPL for $6,995,755.78 pursuant to contracts for differences (“the CFDs”) allegedly executed between Kashish and SEPPL. SEPPL did not enter an appearance. Thus, on 4 February 2019, Kashish obtained judgment in default of appearance against SEPPL for the claimed sum in addition to interest thereon and costs.¹¹

On 13 February 2019, Kashish applied to garnish the DBS Account and obtained a garnishee order (dated 18 February 2019) for DBS Bank Ltd to show cause. A copy of this court order was served on SEPPL on 21 February 2019.

On 8 March 2019, the court granted Kashish’s garnishee application and ordered DBS Bank Ltd to disburse the funds in the DBS Account to Kashish in partial satisfaction of the judgment debt owed to it by SEPPL. This was duly executed by DBS Bank Ltd, which informed SEPPL by way of a debit notice dated 21 March 2019 that it had debited the DBS Account in full pursuant to the court order.¹² As a result, there were no remaining moneys in the DBS Account.

SEPPL’s application for judicial management

SEPPL applied for judicial management (“JM”) and interim judicial management (“IJM”) on 21 August 2019 and 17 September 2019 respectively. The IJM application was dismissed on 23 September 2019, with costs of $3,500 ordered to be paid by SEPPL to RCMA. The JM application was similarly dismissed on 24 October 2019 because the court did not consider that the making of a JM order would be likely to achieve a more advantageous realisation of SEPPL’s assets than a winding-up of SEPPL.¹³ The court further ordered costs of $8,000 to be paid by SEPPL to RCMA.¹⁴ These costs amounted to $11,500 in total (“the Costs”).

On 30 October 2019, RCMA’s solicitors sent a letter to SEPPL’s solicitors requesting that SEPPL make payment of the Costs. However, SEPPL failed to do so.¹⁵

The Mareva injunction

On 16 September 2019, Dedar Singh Gill JC (as he then was) granted a Mareva injunction restraining SEPPL and its related entities from removing from Singapore any assets in Singapore, and/or disposing of, dealing with or diminishing the value of any assets whether in or outside Singapore, up to the value of $1,853,795.95.¹⁶

In doing so, Gill JC had considered that there was a real risk of dissipation of assets, based on the apparent breach of the Injunction through SEPPL’s abovementioned withdrawal of moneys from the OCBC Account and the garnishment of the moneys in the DBS Account by Kashish (see Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another [2020] SGHC 18 (“Sun Electric”) at [19], [24] and [26]).

Service of statutory demand on SEPPL

On 21 November 2019, RCMA’s solicitors sent a letter served by hand and by registered mail to SEPPL’s registered office, requiring SEPPL to make payment of $11,568.88, being the amount of the Costs and accrued interest (“the Statutory Demand”).¹⁷

On 11 December 2019, SEPPL’s solicitors responded to the Statutory Demand by letter. SEPPL admitted to owing RCMA $11,500 and interest of 5.33% per annum, and proposed to make payment to RCMA in instalments. SEPPL proposed to pay the first instalment of $3,000 on 13 December 2019, the second instalment of $3,000 on 27 December 2019 and the final instalment of $5,500 as well as all accrued interest on 10 January 2020. However, RCMA rejected this proposal on the same day.¹⁸

Nevertheless, RCMA received $3,000 from SEPPL by way of payment into RCMA’s solicitors’ client account on 13 December 2019. Thus, the amount of $8,568.88 in addition to accrued interest since 21 November 2019 remained due and owing from SEPPL to RCMA. Apart from the first instalment of $3,000, no further payments were made by SEPPL to RCMA.¹⁹ As of 24 August 2020, due to the accrual of interest on the outstanding Costs, the amount of $8,973.41 remained due and owing from SEPPL to RCMA.²⁰

My decision

The grounds for winding-up relied upon by RCMA are ss 254(1)(e) and/or 254(1)(i) of the Companies Act.²¹ Section 254(1)(e) pertains to the company being “unable to pay its debts”, whereas s 254(1)(i) pertains to the court being of the opinion that it is “just and equitable that the company be wound up”. Having considered the parties’ submissions and the evidence, I found that both grounds were satisfied. Before addressing each of these grounds, I shall first deal with several preliminary issues.

Preliminary issues Locus standi

RCMA submitted that it was entitled to apply for SEPPL’s winding-up as it was a prospective or contingent creditor of SEPPL for $7,466,668.01 (the amount claimed by RCMA in Suit 191) and a creditor of SEPPL for $8,973.41 (the amount of the outstanding Costs and accrued interest).²²

Section 253(1)(b) of the Companies Act states that a company may be wound up upon an order of the court on the application of “any creditor, including a contingent or prospective creditor, of the company”. In Re People’s Parkway Development Pte Ltd [1991] 2 SLR(R) 567 at [10], the High Court cited the definition in Re William Hockley Ltd [1962] 1 WLR 555 at 558 that a “contingent creditor” is “a person towards whom under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date”.

Here, under its...