Re Bintan Lagoon Resort Ltd

• Jurisdiction: Singapore
• Judgment Date: 19 August 2005
• Date: 19 August 2005
• Docket Number: Originating Petition No 3 of 2005
• Court: High Court (Singapore)

Re Bintan Lagoon Resort Ltd

[2005] SGHC 151

Andrew Ang J

Originating Petition No 3 of 2005

High Court

Companies–Receiver and manager–Judicial management order–Whether judicial management order should be granted where receiver and manager already appointed by secured creditor–Whether judicial management order should be granted on public interest grounds–Section 227B (10) Companies Act (Cap 50, 1994 Rev Ed)

The petitioners, creditors of the respondent company (“the Company”), applied for the Company to be placed under judicial management notwithstanding that a receiver and manager had already been appointed by a secured creditor (“Winners Path”). Winners Path had been formed by the principal shareholders of the Company and had bought out the Company's other major creditors who had, pursuant to a deed of debenture, a fixed and floating charge over the Company's assets.

The petitioners alleged that the buyout was done in bad faith and that after leading the petitioners into believing that the Company would enter into a restructuring arrangement with them, the principal shareholders of the Company, through Winners Path, had appointed a receiver and manager instead.

In support of their application, the petitioners submitted that: (a) it would be in the public interest to rescue companies that had a decent chance of survival; (b) there would be adverse economic, social and political consequences of allowing the Company to be wound up; and (c) the manner in which Winners Path had acquired its security violated the rules of fair play and good conscience.

Held, dismissing the application:

(1) Section 227B (5) of the Companies Act (Cap 50, 1994 Rev Ed) (“the Act”) mandated that in view of the appointment of a receiver and manager and the objections of Winners Path, the court should dismiss the petition unless the petitioners could persuade the court that it was an appropriate case in which the court should exercise its power under s 227B (10) of the Act to appoint a judicial manager on the basis that “the public interest so require [d]”. The test in s 227B (10) was not merely whether it was in the public interest to appoint a judicial manager, but rather whether the court considered “that the public interest so require [d]”. It not only had to be opportune but also importunate that the court exercise its power under s 227B (10): at [12] to [14].

(2) The fact that employees could lose their livelihood if the Company were to be wound up was not sufficient for the court to exercise its power under s 227B (10) of the Act. Companies failed sometimes and often with adverse consequences to employees, customers and suppliers. It could not seriously be suggested that the court should exercise its power under s 227B (10) each time this happened. It was also a gross exaggeration to suggest that there could be any political repercussions. No case was made out to invoke the court's power under s 227B (10): at [15] to [17].

(3) The allegation that Winners Path had violated the rules of fair play and good conscience was not made out. It was not shown that the Company was not serious in its proposals for restructuring and was merely leading the petitioners on. Both the Company and the petitioners had negotiated in the hope that the outcome would be more advantageous than if the petitioners were to enforce recovery of the outstandings. In any event, even if the petitioners' contention was made out, this was not a case in which the public interest required the appointment of a judicial manager: at [20] and [21].

Cosmotron Electronics (Singapore) Pte Ltd, Re [1989] 1 SLR (R) 121; [1989] SLR 251 (folld)

Companies Act (Cap 50, 1994 Rev Ed) s 227B (10) (consd);ss 227B (1), 227B (5)

Nishith Shetty and Jenny Tsin (Wong Partnership) for the petitioners

Thio Shen Yi and Adrian Tan (TSMP Corporation) for the opposing unsecured creditors

Ashok Kumar and Foo Hsiang Ming (Allen & Gledhill) for the opposing secured creditor

Rebecca Chew, Audrey Ng and Meah Tze Hua (Rajah & Tann) for the company

Cavinder Bull, Sham Sabnani and Benjamin Gaw (Drew & Napier LLC) for the receiver and manager.

Andrew Ang J

1 This was an application by the petitioners for an order, inter alia, that the respondent company (“the Company”) be placed under judicial management notwithstanding that a receiver and manager had...