Re Dayang Construction and Engineering Pte Ltd

• Jurisdiction: Singapore
• Judge: Belinda Ang Saw Ean JC
• Judgment Date: 08 June 2002
• Neutral Citation: [2002] SGHC 123
• Docket Number: Companies Winding Up No 600086 of 2002
• Date: 08 June 2002
• Year: 2002
• Published date: 19 September 2003
• Plaintiff Counsel: Tan Chee Meng and Florence Chew (Ruth Chia & Co)
• Citation: [2002] SGHC 123
• Defendant Counsel: Zaheer K Merchant and Sadique Marican (Madhavan Partnership),Tito Isaac (Tito Isaac & Co),Karen Loh,Rajendran Kumaresan (WT Woon & Co)
• Court: High Court (Singapore)
• Subject Matter: Statutory demand under s 254(2)(a) of Companies Act (Cap 50, 1994 Ed),Whether demand letter complies with statutory requirements,s 254(1)(e) Companies Act (Cap 50, 1994 Ed),s 254(2)(a) Companies Act (Cap 50, 1994 Ed),Whether company insolvent and unable to pay its debts,Whether to maintain order for winding up,Winding up,Validity,Statutory demand,Companies,Company unable to pay debts,Whether demand letter defective,Demand letter not giving company three weeks to pay and not warning it of consequences of failure to comply

A judgment creditor petitioned on 11 March 2002 for Dayang Construction & Engineering Pte Ltd (‘Dayang’) to be wound up under s 254(1)(e) of the Companies Act (Cap 50) (the ‘Act’) on the ground that Dayang is unable to pay its debts. The petitioner relied on the provisions of s 254(2)(a) of the Act as proof of insolvency. The petitioner stated in the Amended Petition that judgment in the sum of $200.090.30 together with pre-judgment interest and costs of $1,216.99 and $1,800 respectively were entered on 29 November 2001 against Dayang. On 5 December 2001, the solicitors for the petitioner served on Dayang a letter demanding payment of the judgment sum, interest and costs. At the adjourned hearing of the Amended Petition on 12 April 2002, counsel for Dayang sought an adjournment of four weeks as the company wished to apply for Judicial Management. Goh Eng Soo (‘Goh’), a director of Dayang, filed an affidavit to oppose the winding up, stating that legal proceedings against Dayang’s two trade debtors, namely Tong Hup Seng Construction Co Pte Ltd (‘Tong Hup Seng’) and Guobena Sdn Bhd (‘Guobena’) were intended, that the company needed time to file for Judicial Mangement or apply for a Scheme of Arrangement and that several creditors supported the adjournment. The petitioner and other creditors who supported the winding-up opposed the adjournment.

After hearing arguments and on the evidence, the application for an adjournment was refused and an order was made for Dayang to be wound up. On 18 April 2002, counsel for Dayang requested further arguments. The judge permitted the company and those creditors opposing the Amended Petition another opportunity to be heard. At the hearing, counsel for Dayang contended that the 5 December letter was not a statutory demand within s 254(2)(a) of the Act, as it was defective in two respects: firstly, it did not refer to a period of three weeks for payment but had demanded repayment within five days; secondly, it contained no warning that the company would be wound up if the company did not meet the demand. Consequently, the Amended Petition must fail.

Held

, maintaining the winding-up order

(1) Having regard to the scheme, structure and language of s 254(2)(a), there is clearly no merit whatsoever in either of the alleged defects raised by counsel for Dayang. The letter of 5 December 2001 was an effective demand for the purposes of s 254(2)(a) (see 19).

(2) The three-week period is not a statutory requirement of the notice of demand itself. It is relevant only in the context of a company failing or neglecting to pay a debt within that period: Re Simpson Devp Investment (HK) Co Ltd [1999] 1 HKLRD 202 followed. It is also not a legal imposition of s 254(2)(a), express or implied, that the creditor must indicate on the face of the demand the implications to the company and the detriment it may suffer if it fails to comply, or the other two alternatives available to it, namely securing or compounding. Ultimately, it is for the court to decide whether a company should be wound up in the exercise of its discretion. The form in which a statutory demand is expressed ought to be approached with the general discretion of the court in mind and in this case, it was not suggested that Dayang was in fact misled by the demand: Helicarr Consolidated Ltd v Royal Insurance Fire & General (NZ) Ltd [1993] 2 NZLR 46 followed (see 20 – 33).

(3) It was clear from the Amended Petition that the petitioner had an undisputed judgment debt, it was due and Dayang had neglected to pay it. The court was entitled to accept that as prima facie proof, and inference could be drawn, that the company was unable to pay its debts within the meaning of s 254(2)(e): Cornhill Insurance Plc v Improvement Services Ltd And Others [1986] 1 WLR 114 and Taylors Industrial Flooring Ltd v M & H Plant Hire (Manchester) Ltd [1990] BCLC 216 followed (see 35 and 36).

(4) The company was commercially insolvent. It had no available cash to settle the judgment debt. There were no on-going projects in hand and no future contracts in the pipeline. There was no reason to keep the company alive just to pursue a claim against the two trade debtors when that could be left to liquidators who had consented to act in the winding up of the company. In the hands of those liquidators, any possible potential conflict of interest would be avoided, given that Goh’s brother and father are directors of Tong Hup Seng (see 39 – 42).

(5) The initiatives to stop the winding-up for the reasons given were viewed with some reservations. Dayang had made loans to its directors and directors’ fees were due from the company. With liquidators in place, the directors would face the possibility of having to repay these loans and stand in the queue like the rest of the unsecured creditors to recover any sum due to them from the company as directors (see 44).

(6) The proposed Scheme of Arrangement exhibited in Goh’s second affidavit was skimpy and unconvincing. It glaringly omitted to take into account the substantial borrowings of the directors and solely focused on the trade debts of Tong Hup Seng and Guobena. Creditors were left to wonder when the proposal would take effect and the length of time they would have to wait for payment. The proposal was also dependent on the company succeeding in any litigation against Tong Hup Seng and Guobena (see 47).

(7) None of the creditors who opposed the grant of a winding-up order filed affidavits stating reasons for their opposition. From what was said in court or seen in letters exhibited by Dayang, they were all mere expressions of willingness to give the company time to recover money from Tong Hup Seng and Guobena. That alone was not good enough a reason for opposing the winding-up, even if it represented the wishes of the majority (see 49).

(8) Accordingly, the order made on 12 April 2002 to wind up Dayang is to stand.

Cases referred to

Bateman Television Ltd And Another v Coleridge Finance Co Ltd

[1969] NZLR 794 (refd)

Cornhill Insurance Plc v Improvement Services Ltd And Others

[1986] 1 WLR 114 (folld)

Helicarr Consolidated Ltd v Royal Insurance Fire & General (NZ) Ltd

[1993] 2 NZLR 46 (folld)

Malayan Plant (Pte) Ltd v Moscow Narodny Bank Ltd

[1980] 2 MLJ 53 (refd)

Pac Asian Services Pte Ltd v European Asian Bank AG

[1989] 3 MLJ 385 (refd)

Re Simpson Devp Investment (HK) Co Ltd

[1999] 1 HKLRD 202 (folld)

Sri Hartamas Development Sdn Bhd v MBF Finance Bhd

[1992] 1 MLJ 313 (refd)

Taylors Industrial Flooring Ltd v M & H Plant Hire (Manchester) Ltd

[1990] BCLC 216 (folld)

United Malayan Banking Corp Bhd v Richland Trade & Developmetn Sdn Bhd

[2000] 4 MLJ 670 (refd)

Wei Giap Construction Co (Pte) Ltd v Intraco Ltd

[1979] 2 MLJ 4 (refd)

Legislation referred to

Companies Act (Cap 50) ss 254(1)(e), 254(2)(a)

Insolvency Act 1986 [UK] s 123(1)(a)

Judgment

GROUNDS OF DECISION

1. Eastern Steel Services Pte Ltd, a judgment creditor, petitioned on 11 March 2002 for Dayang Construction & Engineering Pte Ltd ("Dayang") to be wound up under s 254(1)(e) of the Companies Act (Cap. 50) on the ground that Dayang is unable to pay its debts. As proof of insolvency, the petitioner relied on the provisions of s 254(2)(a) of the Act under which a company shall be deemed to be unable to pay its debts if:

"(a). a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $10,000 then due has served on the company by leaving at the registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor;"

2. The petitioner stated in the Amended Petition that judgment in the sum of $200,090.30 together with pre-judgment interest and costs of $1,216.99 and $1,800 respectively were entered on 29 November 2001 against Dayang. On 5 December 2001, solicitors for the petitioner served on Dayang a letter demanding payment of the judgment sum, interest and costs. This demand letter, which was relied on for the purposes of s 254(2)(a) states:

"

YOUR REF

OUR REF: FC/ES/2687/01/lit/ac

5 December 2001

M/s Dayang Construction & Engineering Pte Ltd

19 Kim Keat Road

#04-00 Fu Tsu Building

Singapore 328804

Dear Sirs,

D.C. SUIT NO. 4185 OF 2001/V

CLAIM BY EASTERN STEEL SERVICES PTE LTD

We refer to the above matter.

By way of service, we forward herewith a L.S. copy of the Judgment dated 29^th November 2001 obtained against you.

TAKE NOTICE that unless the outstanding Judgment sum of S$200,090.30, interest thereon at the rate of 6% per annum calculated from the date of the Writ 23^rd October 2001 till the date of Judgment 29^th November 2001 and S$1,800.00 costs are paid to our clients or to us as our clients’ solicitors within five (5) days from the date hereof, our clients will be proceeding as they deem fit for the recovery thereof.

Yours faithfully

Signed

Encl.

cc: clients

"

3. At the adjourned hearing of the Amended Petition on 12 April 2002, Counsel for Dayang sought an adjournment of four weeks as the company wished to apply for Judicial Management.

4. Goh Eng Soo ("Goh"), a director of Dayang, filed an affidavit on 4 April 2002 to oppose the winding-up. He admitted that the company’s unsecured creditors were owed approximately $1.5 million. But the company’s inability to pay its creditors was largely due to the company being owed substantial sums of money by two main trade debtors, Tong Hup Seng Construction Co Pte Ltd ("Tong Hup Seng") and Guobena Sdn Bhd ("Guobena"). Legal proceedings against both trade debtors were intended. Moreover, the company needed time to complete and finalise the accounts and file for Judicial Management or apply for a Scheme of Arrangement. Several creditors supported the adjournment. Goh claimed that...