Re Halley's Departmental Store Pte Ltd

• Jurisdiction: Singapore
• Judge: G P Selvam J
• Judgment Date: 25 January 1996
• Neutral Citation: [1996] SGHC 10
• Docket Number: Originating Petition No 19 of 1995
• Date: 25 January 1996
• Published date: 19 September 2003
• Year: 1996
• Plaintiff Counsel: Michael Moey (Moey & Yuen)
• Citation: [1996] SGHC 10
• Defendant Counsel: Tan Lee Cheng (Lee Bon Leong & Co)
• Court: High Court (Singapore)
• Subject Matter: Whether scheme to genuinely offer creditors satisfaction or avert independent investigation into affairs of the company,ss 210(1) & (3) Companies Act (Cap 50, 1994 Ed),Factors to be considered,Approval by the court,Schemes of arrangement,Companies

Judgment:

GP SELVAM J

The petitioners, Halley`s Departmental Store Pte Ltd, made this application under s 210 of the Companies Act (Cap 50, 1994 Ed) (the Act) praying that the scheme of arrangement set out in the schedule to it to be sanctioned by the court so as to be binding on the company and all its unsecured creditors. The scheme provided for payment of three cents to every dollar of unsecured debt. The English equivalent of s 210 was s 206 of the Companies Act 1948.

The scheme of arrangement was as follows:

It is proposed that each unsecured creditor will be paid 10 cents to every dollar owed by Halley`s Departmental Store Pte Ltd to them provided full recovery is made from the company`s trade creditors. Three cents to every dollar owed will be paid over two equal monthly instalments. The date for commencement of payment of the instalments shall be deferred to one month after the court order sanctioning the approval of the creditors is granted and the balance at the end of every quarter in proportion to the moneys recovered from the trade debtors less the legal costs incurred.

Section 210(1) of the Act provides that:

Where a compromise or arrangement is proposed between a company and its creditors or any class of them or between the company and its members or any class of them, the court may, on the application in a summary way of the company or of any creditor or member or the company, or, in the case of a company being wound up, of the liquidator, order a meeting of the creditors or class of creditors or of the members of the company or class of members to be summoned in such manner as the court directs.

Section 210(3) of the Act provides that:

If a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy at the meeting or the adjourned meeting agrees to any compromise or arrangement, the compromise or arrangement shall, if approved by order of the Court, be binding on all the creditors or class of creditors or on the members or class of members, as the case may be, and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company.

In this case the company obtained an order to convene a meeting and subsequently a meeting was held. The company had the requisite number to win the day. One of the unsecured creditors, Twenty Eight Accessories Trading Pte Ltd (Twenty Eight Accessories), abstained from voting.

The company then petitioned the court for approval of the scheme. Twenty Eight Accessories opposed the petition.

Background facts

It would be convenient to narrate the facts leading to the petition to the court. The company was established with the principal object of operating business stores. The authorized capital was $5m. The paid up capital was $2m.

On 5 November 1994, Twenty Eight Accessories obtained a judgment for $256,183.86 for goods sold. As the judgment debt was not satisfied they filed a petition to wind up the company. On 17 March 1995 the company moved for and obtained a stay of the winding-up proceedings. The company told the court that it would make a scheme of arrangement for the consideration of the unsecuredcreditors. The suggestion at that time was `at least three cents to a dollar in return for their debt`. It was said it could be as much as ten cents to the dollar. On the other hand, said the company, in the event of winding up the creditors may not recover even two cents to the dollar.

On 7 April 1995 the company obtained an order to convene the meeting for the purpose of considering a scheme of arrangement between the company and the unsecured creditors. A provisional list of unsecured creditors was submitted. The list contained some 70 names including Twenty Eight Accessories. The...