Re Lehman Brothers Finance Asia Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 14 September 2012
• Date: 14 September 2012
• Docket Number: Originating Summons No 149 of 2012
• Court: High Court (Singapore)

Re Lehman Brothers Finance Asia Pte Ltd (in creditors' voluntary liquidation)

[2012] SGHC 190

Quentin Loh J

Originating Summons No 149 of 2012

High Court

Insolvency Law—Winding up—Liquidator—Whether relevant date for conversion of foreign currency debts to Singapore dollars under r 181 Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) for creditors' voluntary liquidation should be date on which statutory declaration was lodged with ACRA and Official Receiver or date of resolution of company for creditors' voluntary liquidation of company—Rule 181 Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed)

A subsidiary investment holding company wholly owned by Lehman Brothers Investments Pte Ltd (in creditors' voluntary liquidation) (‘the Company’) was put into creditors' voluntary liquidation by a resolution passed by the Company on 17 October 2008 (‘the Resolution’), and liquidators (‘the Liquidators’) appointed. The statutory declaration (‘the Statutory Declaration’) for voluntary winding up was lodged with the Accounting and Corporate Regulatory Authority of Singapore (‘ACRA’) and the Official Receiver on 23 September 2008. The Liquidators received foreign currency claims from unsecured creditors for USD 164,177,290.40, JPY 455,941.00, AUD 1,948.65 and GBP 11.00. As a result of realising a substantial part of the Company's assets, the Liquidators decided to declare an interim dividend in respect of all unsecured debts subject to examination of proof of debts. The Liquidators informed unsecured creditors of the admission or rejection, in whole or in part, of these proofs on 19 September 2011, but postponed the distribution of the interim dividends beyond the prescribed limit to permit determination of this question: whether the relevant date for conversion of foreign currency debts to Singapore dollars (‘conversion date’) under r 181 of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (‘Rule 181’) for a creditors' voluntary liquidation should be the date on which the Statutory Declaration was lodged with ACRA and the Official Receiver or the date of the Resolution of the Company for a creditors' voluntary liquidation of the Company.

Held, answering the question:

(1) The relevant conversion date under Rule 181 for a creditors' voluntary liquidation should be the date of the Resolution of the Company for a creditors' voluntary liquidation of the Company (‘the Resolution Date’). Attorney General v Creditors of Tenganipah Estate [1956] SCR 90 was distinguishable as standing only for the proposition that a debt did not become due the moment operations of a company had ceased: at [19] to [21].

(2) The Resolution Date considered the substantive effect on the legal status of a company under a creditors' voluntary liquidation as a bankruptcy order did on the legal status of an individual. A comparison of rr 86, 87 and 88 of the Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed) and rr 181, 182, 184, 186 of the Bankruptcy Rules reveal the statutory intention for a bankruptcy order to correspond to the winding-up order and the resolution for winding up: at [25] and [30].

(3) The Resolution Date in creditors' voluntary liquidation corresponded to the date of the winding-up order in compulsory liquidation. The date of the winding-up Order was the relevant conversion date in Compulsory liquidation so that local and foreign creditors might be treated alike; see Re Mohamed Yunus Valibhoy[1994] 3 SLR (R) 504. Similarly, using the Resolution Date as the relevant conversion date ensures equality of treatment for all creditors; see In re Lines Bros Ltd (in liquidation)[1983] Ch 1: at [35] and [39].

(4) The incongruity of the insolvency set-off date and the relevant conversion date did not change the position of the law relating to proofs of debts, particularly in light of the interpretation of s 87 of the Bankruptcy Act (Cap 20, 2009 Rev Ed) in Re City Securities Pte[1995] 2 SLR (R) 746, and thus did not alter the use of the Resolution Date as the relevant conversion date: at [42] and [45].

[Observation: The court had reservations about whether the Singapore High Court should continue to be bound by the decisions of the previous Court of Appeal of Sarawak, North Borneo and Brunei, particularly when we had developed our own jurisprudence over almost half a century since our independence: at [22].]

AG v Creditors of Tenganipah Estate [1956] SCR 90 (distd)

Amalgamated Investment & Property Co Ltd, Re [1985] Ch 349 (distd)

Arab Banking Corp v United Overseas Bank Ltd [1991] 1 SLR (R) 560; [1991] SLR 55 (refd)

City Securities Pte, Re [1995] 2 SLR (R) 746; [1995] 3 SLR 617 (refd)

Dynamics Corp of America, Re [1976] 1 WLR 757; [1976] 2 All ER 669 (refd)

Good Property Land Development Pte Ltd v Société-Générale [1996] 1 SLR (R) 884; [1996] 2 SLR 239 (refd)

Gresham Corp Pty Ltd, Re [1990] 1 Qd R 306 (refd)

Lines Bros Ltd, Re [1983] Ch 1 (folld)

Mah Kah Yew v PP [1968-1970] SLR (R) 851; [1969-1971] SLR 441 (refd)

Mohamed Yunus Valibhoy, Re [1994] 3 SLR (R) 504; [1995] 1 SLR 601 (refd)

MS Fashions Ltd v Bank of Credit and Commerce International SA (No 2) [1993] Ch 425 (refd)

Panorama Development Pte Ltd v Fitzroya Investments Pte Ltd [2003] 1 SLR (R) 93; [2003] 1 SLR 93 (refd)

Russian Commercial and Industrial Bank, Re [1955] Ch 148; [1955] 1 All ER 75 (distd)

Bankruptcy Act (Cap 20, 1985 Rev Ed) s 40 (3)

Bankruptcy Act (Cap 20, 2009 Rev Ed) ss 75, 87 (3) (consd) ; ss 87, 88

Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) rr 181, 182, 184, 186 (consd)

Companies Act (Cap 50, 2006 Rev Ed) ss 255, 291 (6) , 310 (1) , 327 (2) , 327 (3)

Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed) rr 86, 87, 88 (consd)

Criminal Procedure Code (Cap 132, 1955 Rev Ed) s 295 (3)

Republic of Singapore Independence Act 1965 (1985 Rev Ed) s 13

Insolvency Act 1986 (c 45) (UK) ss 247 (2) , 278

Insolvency Rules 1986 (SI 1986 No 1925) (UK) r 4.91

Malaysia Act 1963 (Act No 26 of 1963) (Malaya) s 88 (3)

Patrick Ang Peng Koon and Chua Beng Chye (Rajah & Tann LLP) for the applicant

Andrew Chan Chee Yin and Goh Zhuo Neng (Allen & Gledhill LLP) for Fullerton (Private) Limited.

Judgment reserved.

Quentin Loh J

1 This is an application by the liquidators of Lehman Brothers Finance Asia Pte Ltd (‘the Company’) pursuant to s 310 (1) of the Companies Act (Cap 50, 2006 Rev Ed) (‘CA’) to determine the relevant date for the conversion of foreign currency debts to Singapore dollars under r 181 of the Bankruptcy Rules (Cap 20, R 1, 2006 Rev Ed) (‘Rule 181’) for a creditors' voluntary liquidation.

2 The question in the Originating Summons is framed thus:

1. (1) Whether debts of the Company in a currency other than Singapore Dollars which are admitted in proof by the Liquidators, for the purposes of dividends in respect of such debts in the Creditors' Voluntary Liquidation of the Company, are to be converted into Singapore Dollars at the exchange rate prevailing:-

   1. (a) on the date on which the Statutory Declaration was lodged with ACRA and the Official Receiver (i.e. 23 September 2008) being the date of commencement of the Creditors' Voluntary Liquidation of the Company as provided for by section 291 (6) (a) of the Companies Act; or

   2. (b) on the date of the resolutions of the Company and the creditors of the Company passed during the meetings of the Company and its creditors for the Creditors' Voluntary Liquidation of the Company (i.e. 17 October 2008)?

3 There is no Singapore case which decides this issue. However I am told that confusion arises from the decision of the Court of Appeal of Sarawak, North Borneo and Brunei in Attorney General v Creditors of Tenganipah Estate [1956] SCR 90 (‘Tenganipah’) which establishes a different date for conversion of foreign currency debts from the date for proof of debts in bankruptcy. If Tenganipah is binding, this would introduce an inconsistency between local and foreign creditors when calculating provable debts. This application, inter alia, challenges the decision in Tenganipah as unsound in principle and inapplicable to the Singapore context in light of Rule 181.

Factual background

4 The Company was an investment holding company wholly owned by Lehman Brothers Investments Pte Ltd (in creditors' voluntary liquidation) and incorporated in Singapore on 24 August 2007.

5 On 23 September 2008, the Board of Directors (‘the Board’) of the Company decided to place the Company into creditors' voluntary liquidation and to appoint M/s Peter Chay Fook Yuen, Bob Yap Cheng Ghee and Roger Tay Puay Cheng as provisional liquidators. The Board lodged a statutory declaration (‘the Statutory Declaration’) on the same day with the Accounting and Corporate Regulatory Authority of Singapore (‘ACRA’) and the Official Receiver which stated, inter alia, that the Company could not continue its business due to its liabilities and that meetings of the Company and its creditors had been called.

6 The resolution (‘the Resolution’) placing the Company in creditors' voluntary liquidation was passed on 17 October 2008, appointing the three provisional liquidators stated in the Statutory Declaration as the liquidators of the Company (‘the Liquidators’). Notice of Appointment of the Liquidators was lodged with ACRA and the Official Receiver.

7 The Liquidators received claims from the unsecured creditors for the following sums in the respective foreign currencies:

(a) USD 164,177,290.40;

(b) JPY 455,941.00;

(c) AUD 1,948.65; and

(d) GBP 11.00.

8 The Liquidators were subsequently able to realise a substantial part of the Company's assets, bringing the total cash or cash equivalent to approximately SGD 213,000,000. As a result, the Liquidators decided to declare an interim dividend in respect of unsecured debts owed by the Company, and gave notice to all known unsecured creditors of this intention on 22 August 2011. The Liquidators examined the proof of debts...