Re Horizon Knowledge Solutions Pte Ltd

CourtHigh Court (Singapore)
JudgeLai Siu Chiu J
Judgment Date02 December 2004
Neutral Citation[2004] SGHC 270
Citation[2004] SGHC 270
Publication Date07 December 2004
Plaintiff CounselNavinder Singh (Navin and Co)
Defendant CounselTan E-Fang (Hin Tat Augustine and Partners),Wong Soo Chih (Ho Wong and Partners)
SubjectCompanies,Schemes of arrangement,Classification of creditors,Whether related and unrelated unsecured creditors should be treated as falling within the same class of creditors for the purpose of sanctioning a scheme of arrangement,Court's power to sanction proposed scheme of arrangement,Whether sufficient information provided to creditors at creditors' meeting

2 December 2004

Lai Siu Chiu J:

The background

1 Horizon Knowledge Solutions Pte Ltd (“the Company”) was incorporated in Singapore on 28 February 2000 under its former name Postkid.com Pte Ltd, as a private company limited by shares. It changed to its present name on 24 October 2004. The Company is part of a group of companies controlled by Horizon Education and Technologies Limited (“the parent company”) which is listed on the Stock Exchange of Singapore (“SGX”). The Company is principally engaged in media and trading activities.

2 On 2 March 2004, the Company filed the above (ex parte) Originating Summons (“the OS”) applying, inter alia, for the following orders:

(a) that the Company be at liberty to convene a meeting of creditors of the Company for the purpose of considering a scheme of arrangement (“the scheme”) proposed by the Company to the creditors;

(b) no proceedings in any action be taken against the company or be continued from the date of the order to be made until the holding of the meeting of creditors, pursuant to s 210(10) of the Companies Act (Cap 50, 1994 Rev Ed) (“the Act”).

The OS was supported by an affidavit filed by the Company’s former director Faisal Alsagoff (“Alsagoff”), who is a director of the parent company.

3 The OS was granted an order in terms of prayers (a) and (b) above on an urgent basis on 3 March 2004 (“the Order of Court”). Pursuant to the Order of Court, a meeting of creditors (“the creditors’ meeting”) of the Company was convened on 24 March 2004.

4 On 5 May 2004, the Company filed Summons in Chambers No 2452 of 2004 (“the application”) praying for the scheme to be sanctioned by the court so as to be binding upon the Company and its unsecured creditors. The application was supported by an affidavit filed by the Company (again affirmed by Alsagoff) but it was opposed by two creditors.

5 After several part hearings, the application was dealt with finally on 30 August 2004. I dismissed the application and the Company has now filed a notice of appeal against my decision (in Civil Appeal No 97 of 2004).

The facts

6 In his first affidavit filed in support of the OS, Alsagoff explained that the parent company was the subject of a reverse take-over (“RTO”) in June 2000 by a third party. He deposed that this fact had an adverse effect on the Company’s ability to trade and made the Company’s trading partners cautious. The Company encountered cash-flow difficulties and Alsagoff listed the suits which the Company faced in the High Court, the Subordinate Courts as well as in the Small Claims Tribunal. Further, a judgment creditor, Fabulous Printers Pte Ltd (“Fabulous”), pursuant to a default judgment obtained under O 13 of the Rules of Court (Cap 322, R 5, 1997 Rev Ed) in Suit No 290 of 2003 on 7 April 2003 for $272,867.35, had filed Companies Winding Up No 30 of 2004 (“the winding-up proceedings”). This and other execution proceedings had caused the Company’s bank account to be frozen. It resulted in the Company being unable to disburse funds to pay various creditors and this led in turn to legal and/or enforcement proceedings against the Company.

7 Alsagoff deposed that since its incorporation, the parent company had injected $6m into the Company through loans and bank credit lines guaranteed by the parent company. The parent company had been in the information technology business for almost 20 years during which time it had built up a significant amount of goodwill. Alsagoff said it would not be in the interests of any creditor for such an intangible asset to be terminated abruptly by the winding-up proceedings which were scheduled to be heard on 5 March 2004.

8 Alsagoff deposed that despite concerted efforts by the Company, it could no longer pay its debts to its creditors, including the judgment debt of Fabulous which it had partially settled. The accounting consultants, BDO International (“BDO”), appointed by the Company to prepare and administer the scheme proposed, stated that the Company’s total debts as at 31 January 2004 were $9,533,243 whilst its current assets as at that date were only $4,673,190 resulting in a shortfall of $4,860,044.

9 He deposed that a forced sale of the Company’s unencumbered assets would only yield $51,906 whilst realisation in a liquidation scenario would only total about $395,797. This would mean that unsecured creditors would receive approximately four cents in a dollar in respect of their claims as worked out by BDO. Alsagoff exhibited a list of the Company’s creditors to his affidavit. The list showed the claims of unsecured creditors totalled $722,196.45, that of secured creditors totalled $3,196,298.30 whilst those of unsecured related party creditors totalled $3,541,140.05. One of these related party creditors was the parent company which was owed $3,089,699.30.

10 Under the scheme proposed by BDO, the Company intended to pay unsecured creditors 15% of their claims in three equal instalments over a period of 18 months at six-monthly intervals.

11 In his second affidavit filed after the creditors’ meeting, Alsagoff exhibited the minutes of the creditors’ meeting which he chaired. He deposed to the following results after the attendees had voted:

Number

Percentage

Value (S$)

Percentage

For

20

94.23%

$3,955,905.61

86.96%

Against
_____

3
______

5.77%
________

$242,145.33
_____________

13.04%
________

Total

23

100.00%

$4,198,050.94

100.00%

and described the response in support of the scheme as “overwhelming”. As the 75% threshold required for approval of the scheme under s 210(3) of the Act had been crossed, Alsagoff requested the court’s sanction under s 210(4) for the scheme to be implemented. He explained that the secured creditors of the Company (essentially banks and leasing companies) did not feature in the scheme because the parent company had agreed to absorb the Company’s liability to such creditors. The Company’s debts to the parent company would be subordinated to those of the unsecured creditors.

12 As stated earlier, the application was opposed by at least three creditors one of which was International Factors (Singapore) Ltd (“IFS”). The Vice-President of IFS, one Teoh Chun Mooi (“Teoh”), filed two affidavits. In her first affidavit, she complained of the lack of transparency of the proposed scheme as the unsecured creditors did not know how the debts owed to related party creditors came about. IFS had repeatedly requested for details but in answer to their queries, the Company’s solicitors merely forwarded its unaudited accounts to IFS’s solicitors.

13 In her second affidavit, Teoh alleged that the scheme was prejudicial to the interests...

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3 cases
  • The Royal Bank of Scotland NV v TT International Ltd
    • Singapore
    • Court of Three Judges (Singapore)
    • 31 January 2012
    ...Ltd, Re [2001] 2 BCLC 480 (folld) Hellenic & General Trust Ltd, Re [1976] 1 WLR 123 (distd) Horizon Knowledge Solutions Pte Ltd, Re [2004] SGHC 270 (refd) Landmark Corp Ltd, Re [1968] 1 NSWR 759 (folld) Milverton Group Ltd v Warner World Ltd [1995] 2 EGLR 28 (folld) Ng Huat Foundations ......
  • The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal
    • Singapore
    • Court of Three Judges (Singapore)
    • 31 January 2012
    ...well as the subsequent High Court cases of Re Econ Corp Ltd [2004] 1 SLR(R) 273 (“Re Econ”) and Re Horizon Knowledge Solutions Pte Ltd [2004] SGHC 270 (“Re Horizon”), both of which relied on Wah Yuen. In Wah Yuen, this court found that the company presenting its scheme of arrangement for ap......
  • Re TT International Ltd
    • Singapore
    • High Court (Singapore)
    • 17 June 2010
    ...the vote of the abstaining Scheme Creditors or those who voted in favour of the Scheme. In Re Horizon Knowledge Solutions Pte Ltd [2004] SGHC 270 (“Horizon”), the company proposing the scheme of arrangement had not furnished its creditors with information pertaining to the proposed reverse ......

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