Re Jiangshan Investment Consortium Ltd

• Jurisdiction: Singapore
• Judgment Date: 05 June 2007
• Date: 05 June 2007
• Docket Number: Originating Summons No 101 of 2003
• Court: High Court (Singapore)

Re Jiangshan Investment Consortium Ltd (in liquidation)

[2007] SGHC 91

Judith Prakash J

Originating Summons No 101 of 2003 (Summons No 1979 of 2006)

High Court

Companies–Winding up–Directions relating to conduct of winding up–Directions of how dividend due to contributory of company was to be paid–Competing claims –Claim by ex-wife of contributory on basis of orders of court directing contributory to pay ex-wife various amounts–Claim by designated recipients by virtue of deed–Whether deed operating in priority to orders of court which ex-wife obtained against contributory –Whether garnishee order may be made against liquidator–Whether deed effective even though not in correct format–Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed)–Companies Act (Cap 50, 1994 Rev Ed)

Mr Lam was one of the nine contributories of the company, which was ordered to be wound up. The liquidator took steps to, inter alia, realise the company's assets and subsequently filed summons to obtain directions relating to the conduct of the winding up. Most of the directions were granted except in relation to the question of how the dividend due to Mr Lam in the sum of $107,200 had to be paid as there were competing claimants for the money, namely, Mr Lam's ex-wife (“Mdm Fong”) and a group comprising of three other contributories to the company. The contributories were Mdm Tham, Mr Lim and a company called Grandville (“the designated recipients”).

Mdm Fong claimed an entitlement to the dividend on the basis of the awards of maintenance and division of matrimonial property that were made in her favour by the Family Court consequent upon the divorce proceedings between herself and Mr Lam. In order to protect her interests, three garnishee applications against the liquidator were taken out in the Subordinate Courts. However, at the time of the hearing, there was no garnishee order absolute against the liquidator in respect of the $107,200.

On the other hand, the designated recipients claimed that Mdm Tham was entitled to payment of the money in dispute by virtue of a document entitled “Deed of Waiver Release and Instruction” (“the Deed”) that was executed by Mr Lam and other contributories of the company.

At the hearing, Mdm Fong submitted, inter alia, that: (a) the designated recipients' claim was based on the Deed, an undated document that did not operate in priority to the orders of court which Mdm Fong had obtained against Mr Lam; and (b) pursuant to r 101 (7) of the Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed), the sum of $107,200 ought not to be paid to Mdm Tham as Mr Lam had not executed an instruction in the format of Form 52 directing the liquidator to pay that sum to Mdm Tham. Instead, the sum of $107,200 ought to be given to Mdm Fong as she had valid orders of court directing Mr Lam to make payment of various amounts to her.

On their part, the designated recipients contended, inter alia, that: (a) where a debt had been properly assigned by the debtor to a third person, then a garnishee order issued by a creditor could not attach. A direction by a creditor to his debtor to pay the debt to a third party would be an absolute legal assignment of the debt provided that the third party was aware of the direction and proper notice was given to the debtor; and (b) the Deed was effective even though it was not in Form 52. The liquidator and the court might treat the Deed as a resolution of the majority shareholders under s 273 (1) of the Companies Act (Cap 50, 1994 Rev Ed) (“the Act”) and the court might treat the Deed as sufficient evidence of the wishes of the majority of the contributories pursuant to s 325 (1) of the Act and therefore order payment out to Mdm Tham and the other designated recipients in accordance with the terms of the Deed.

Held, liquidator to pay $107,200 to Mdm Tham and the other designated recipients in accordance with the terms of the Deed:

(1) As to whether a garnishee order might be made against a liquidator, the general principle to be applied was that when a person held money pursuant to a statutory duty that person could not be the subject of a garnishee order. This was because the holder of the money was not the debtor of the person to whom the money was ultimately to be paid. When it was the duty of an officer of the court to distribute money which was in his hands in a particular way (meaning in accordance with a statute) there was no relationship of debtor and creditor between such officer and the person who was entitled to receive those funds. A liquidator was an officer of the court and he had a duty to apply the moneys received in the liquidation in accordance with the provision of the Act. Thus, he would not be considered to be the debtor of any creditor or contributory of the company: at [24].

(2) In the case of a liquidator, no garnishee order could be made against him when he was holding the company's surplus funds as, in that situation, there would be no debt to be attached by the order. Therefore, Mdm Fong was not entitled to apply for garnishee orders in respect of the funds that the liquidator held for distribution to the contributories. The fact that there were court orders ordering Mr Lam to pay her certain amounts was irrelevant: at [26].

(3) Even if it was theoretically possible to garnish moneys in the hands of the liquidator, that would not assist Mdm Fong as there was no existing court order compelling the liquidator to make payment. This was because at the date of the hearing there was no garnishee order absolute against the liquidator in Mdm Fong's favour in respect of the $107,200: at [21].

(4) As to whether the liquidator was bound to make payment to Mdm Tham and the other designated recipients in accordance with the Deed, r 101 (7) provided that if a person to whom dividends were payable desired that they should be paid to some other person, he might lodge with the liquidator a document in Form 52 which should be sufficient authority for payment of the dividend. Rule 101 (7) did not, however, purport to set out an exclusive way for instructions to be given to the liquidator. The rule provided a procedure for directions and if the procedure was followed, then the directions would be complied with by the liquidator. That did not mean that there was no other way of giving the liquidator instructions. What was important was that when the instructions were given, they were clear and in such form as to make it clear to the liquidator from whom they came and that they were irrevocable. In the present case, although the Deed was not a document in the format of Form 52, the Deed fulfilled those requirements and the liquidator was entitled to follow the provisions of the Deed in the same way as he would follow the directions given in any Form 52 executed by any contributory. Similarly, the Deed was sufficient evidence of the wishes of the contributories who signed it and the Court could therefore direct the liquidator to make payment of the surplus in accordance with its terms: at [28].

Low Gim Har v Low Gim Siah [1992] 1 SLR (R) 970; [1992] 2 SLR 593 (refd)

Prout v Gregory (1889) 24 QBD 281 (refd)

Spence v Coleman [1901] 2 KB 199 (folld)

Webb v The Federal Commissioner of Taxation (1922) 30 CLR 450 (folld)

Companies Act (Cap 50, 1994 Rev Ed) ss 273, 273 (1), 325 (1)

Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed) r 101 (7), First Schedule

Foo Maw Shen (Yeo Wee Kiong Law Corporation) for the liquidator

Tan Anamah nee Nagalingam (Ann Tan & Associates) for Fong Kam Mui

Ng Yuen (Ng & Koh) for Grandville Hotel & Resort International Pte Ltd, Lim Ee Ann and Tham Lai Ping Winnie.

Judgment reserved.

Judith Prakash J

1 In May 2006, the liquidator of Jiangshan Investment Consortium Ltd (“the company”) filed the summons which is presently before me in order to obtain various directions relating to the conduct of the winding up. By that date, the liquidator had completed the bulk of the work relating to the liquidation and he needed liberty to convene a meeting of creditors in order to obtain instructions on the declaration of the final dividend. The liquidator, however, also asked for directions to be given to him in respect of the payment of dividends to one Mr Lam Chang Er, a contributory of the company. Most of the directions the liquidator asked for were not controversial and they were duly granted. At the end of the day, only one matter was disputed and required further...