Re Management Recruiters International (Asia) Pte Ltd (formerly known as Humana International (Asia) Pte Ltd)

• Jurisdiction: Singapore
• Judge: Choo Han Teck JC
• Judgment Date: 13 August 2002
• Neutral Citation: [2002] SGHC 179
• Citation: [2002] SGHC 179
• Date: 13 August 2002
• Published date: 19 September 2003
• Plaintiff Counsel: Engelin Teh SC, Daniel Koh and Wendy Yu (Engelin Teh Practice LLC)
• Docket Number: Companies Winding Up No 33 of 2002
• Defendant Counsel: Mohan Pillay, Paul Sandosham and Tan Teck Wang (Wong Partnership)for the respondent
• Court: High Court (Singapore)
• Year: 2002

Judgment

GROUNDS OF DECISION Cur Adv Vult

1. This was a petition by MRI Worldwide Ltd to wind up the respondent company, Management Recruiters International (Asia) Pte Ltd under s 254(2)(a) of the Companies Act, Ch 50. The basis of the petition was that the company is insolvent and unable to pay its debts amounting to 62,366.32.

2. The petitioner is an international management recruitment company that sells franchises of its name and operations to franchisees all over the world. The respondent is one such franchisee, having signed two franchise agreements, namely, the Singapore Franchise Agreement and the Malaysia Franchise Agreement. The respondent also signed two other agreements known as the International Master Franchise Agreement and the Umbrella Agreement with the petitioner. By these agreements, the respondent was permitted to grant sub-franchises to other parties upon payment of requisite royalty fees and commissions to the petitioner. The fee and commission structures are not important for the proceedings before me. The contractual obligations that are relevant are the terms requiring the respondent to report monthly sales and gross revenues, and to pay promptly all fees due.

3. On 10 May 2002 the petitioner terminated all the agreements it signed with the respondent on the ground of "persistent defaults". The main ones being the failure to pay royalties and not reporting of payments received from the sub-franchisees as required under the agreements. Prior to that, on 14 December 2001, the parties agreed on a schedule for the payment of monies due from the respondent to the petitioner. The matter was not resolved satisfactorily and fresh negotiation began on 29 January 2002. More correspondence followed. Even after the agreements were terminated the parties were still writing to each other. The more significant letters were two letters dated 17 May 2002, one from the respondent to the petitioner and the other a reply by the latter to the former; as well as a letter from the respondent's solicitors to the petitioner dated 28 May 2002.

4. Mrs. Teh, counsel for the petitioner submitted that the respondent owes a debt of 62,366.32, but even if the exact amount is disputed, there is no dispute that there is a debt owed which exceeds the statutory amount of $10,000 entitling the petitioner to petition for a winding up order against the respondent. The respondent challenges the petition on three grounds. The first of these grounds is that the petition was founded on an assertion of a debt referred to in "without prejudice" correspondence. Secondly, Mr. Pillay, counsel for the respondent, submitted that the petitioner attempted correct the defect by filing an affidavit in which the deponent Mr. Steven Mills referred to other correspondence and other amounts of purported debt. Thirdly, counsel submitted that the debt is disputed.

5. The petition was based on s 254(1)(e) and s 254(2)(a) of the Companies Act, Ch 50. Section 254(1) provides: "The Court may order the winding up if - (e) the company is unable to pay its debts". Section 254(2) provides:

"A company shall be deemed to be unable to pay its debts if - (a) a creditor by assignment or otherwise to whom the company is indebted in a sum exceeding $10,000 then due has served on the company by leaving at his registered office a demand under his hand or under the hand of his agent thereunto lawfully authorised requiring the company to pay the sum so due, and the company for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor".

The relevant part of 5 of the petition states that "[the respondent] is indebted to [the] petitioner in the sum of at least 62,366.32". The particulars of this debt was set out in a letter dated 12 June 2002 from the petitioner's solicitors to the respondent in which the sum of 62,366.32 was referred to in these terms:

"In any event, our clients note that you have taken the position that you presently owe them the sum of 62,366.32 in royalty payments due to them under the said...