Re Lion City Holdings Pte Ltd

• Judge: Tay Yong Kwang J
• Judgment Date: 27 February 2003
• Neutral Citation: [2003] SGHC 43
• Citation: [2003] SGHC 43
• Defendant Counsel: Lionel Tay and Paul Ng
• Published date: 07 October 2003
• Plaintiff Counsel: Loh Wai Mooi and Rowena Chew (Bih Li & Lee)
• Date: 27 February 2003
• Docket Number: Companies Winding Up No 14 of 2000
• Court: High Court (Singapore)
• Subject Matter: Winding up,Whether order for examination should be discharged because director claimed he had made full disclosure,Insolvency Law,Liquidator's entitlement to information,Liquidator,Order to examine director pursuant to s 285 of Companies Act (Cap 50, 1994 Rev Ed),Court's discretionary power to order examination,Order for examination

1 The applicant, Asad Jumabhoy, is the former managing director of Lion City Holdings Pte Ltd (‘the company’) which was ordered to be wound up on 24 March 2000. The respondents to this application are the liquidators of the company, Mick Aw Cheok Huat and Christopher Bruce Johnson both of Moore Stephens, a firm of Certified Public Accountants.

2 On 23 January 2002, the liquidators applied by ex parte Summons-in-Chambers No. 600131 of 2002 pursuant to section 285 Companies Act for the following orders:

“1. The liquidators be at liberty to examine Asad Jumabhoy on issues concerning the promotion, formation, trade dealings, affairs or property of the company;

2. Asad Jumabhoy be ordered, if necessary for the purpose of the examination to produce all books, correspondence and documents in his custody, power or control as may be required for the purpose of the examination; and

3. The cost of this application be paid out of the company’s assets”.

The application came up for hearing on 1 February 2002 and was adjourned to a date to be fixed. On 18 April 2002, the liquidators commenced Suit No. 450 of 2002 against Asad, his father and his brother for breach of fiduciary duty as directors/former directors of the company, claiming an account of profits and damages to be assessed. The statement of claim has not been filed. On 23 April 2002, Rajendran J granted an order in terms of all three prayers in the liquidators’ application set out above and directed that the examination be held before a District Judge but not in open court.

3 On 5 June 2002, the liquidators discharged their former solicitors and appointed the present solicitors to act for them.

4 On 9 October 2002, the solicitors for the liquidators and the solicitors for Asad attended before an Assistant Registrar sitting in her capacity as a District Judge. The examination was adjourned after Asad’s solicitors informed the District Judge that they might be taking out an application to vary the order made by Rajendran J. The District Judge also directed the liquidators’ solicitors to serve a list of questions for Asad’s response should the said order stand.

5 On 23 October 2002, Asad’s solicitors took out this application seeking to set aside, discharge, vary or modify the order of 23 April 2002 and asking that the costs of and incidental to the application be paid by the liquidators to Asad.

Asad's arguments

6 Asad, in his affidavit of 23 October 2002, stated that he had co-operated with the liquidators and answered their queries to the best of his ability through the many letters exchanged between them. His answers at the examination would be no different from what he had already stated in writing. It appeared to him that his answers had not been useful enough for the liquidators in their claim against him which had already been quantified at for more than $11 million.

7 Further, the liquidators had or ought to have sufficient information of the company’s affairs from him or from the other directors. They obtained the Statement of Affairs from one of the directors (Yusuf Jumabhoy) soon after the winding up but waited almost two years before taking out the application for examination. The liquidators have not explained this delay. The liquidators issued a letter of demand against Asad based on the information provided by that director and then commenced action in Suit No. 450 of 2002.

8 The action commenced by the liquidators on 18 April 2002 was not disclosed to the Court on 23 April 2002 when their ex parte application for examination was heard. No statement of claim was filed in that action and the writ of summons was not served. Its validity has expired. The liquidators were using section 285 Companies Act to buttress their case and to gain an unfair advantage over Asad. It was not a case of prudent liquidators seeking information on whether to sue. Instead, it was a fishing expedition to seek admissions and to obtain information of wrongdoing by giving Asad the opportunity to incriminate himself. What the liquidators wanted was essentially a rehearsal of the cross-examination of Asad.

The liquidators' arguments

9 The liquidators’ application for examination was filed nearly three months before the writ of summons was issued. They denied the allegation that they were merely fishing for information for ulterior purposes. Although Asad had not been uncooperative, there were still numerous areas regarding the company’s affairs in which they needed clarification from him. They had not already asked all the questions relating to the company’s affairs and Asad had certainly not answered all questions fully. For instance, the liquidators in their letter of 26 July 2001 raised three queries concerning Asad’s wife, the company’s fixed assets and another company called Scotts Weitnauer Retailing Pte Ltd. In Asad’s response of 17 September 2001, he stated that he would be reverting to the liquidators on two of the issues. Since then, they had not heard from him regarding any of those three issues.

10 The quantification of the claim was based solely on the Statement of Affairs as was the standard practice of all liquidators. It was also incumbent on the liquidators to ensure that there was a sound basis for any claim set out in the Statement of Affairs. The application for examination was part of that process. They were particularly concerned about two transactions in 1996 in which Asad, through a company owned or beneficially owned by him, purchased the company’s shares in two other entities at what appeared to be a significant undervalue.

11 The only motivating factor for the filing of the action was to ensure that any claim which the company had against the directors was not time-barred after six years. The liquidators did not possess sufficient information at present to facilitate any decision regarding Suit No. 450 of 2002. If the answers provided by Asad at the examination satisfied them that there was no cause of action against him, they would discontinue the said proceedings. They were willing to furnish the documents necessary for Asad to refresh his memory and had in fact done so.

12 It was never their intention to conceal from the Court the fact that action had been commenced. The thought just did not cross the liquidators’ minds as it was only meant as a protective writ of summons. Their solicitors would apply to renew its validity if it became...