Re Tiong Polestar Engineering (formerly known as Polestar Engineering (S) Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 22 January 2003
• Date: 22 January 2003
• Docket Number: Companies Winding Up No 60 of 2000
• Court: High Court (Singapore)

Re Tiong Polestar Engineering Pte Ltd (formerly known as Polestar Engineering (S) Pte Ltd)

[2003] SGHC 8

Woo Bih Li J

Companies Winding Up No 60 of 2000 (Summons in Chambers No 600915 of 2002)

High Court

Companies–Winding up–Creditor garnishing money in bank account–Bank causing delay in payment–Creditor receiving proceeds after commencement of winding up–Whether court to set aside rights of liquidator–Companies Act (Cap 50, 1994 Rev Ed) s 334 (1) (c)–Companies–Winding up–Unfair preference–Application to void transaction–Whether liquidator has locus standi–Whether application made by originating summons or summons-in-chambers–Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 7 (2)–Companies–Winding up–Unfair preference–Insolvent company paying arrears to associate company within two years of winding up–Whether associate company rebutting presumption of unfair preference–Words and Phrases–Definition of “prescribed” in Companies Act (Cap 50, 1994 Rev Ed)–Whether Companies (Application of Bankruptcy Act Provisions) Regulations (Cap 50, R 3, 1995 Ed) validly prescribed–Whether legislation must be made under Bankruptcy Act (Cap 20, 2000 Rev Ed)

The respondent company, Tiong Asia Marine Pte Ltd (“TAM”) was a creditor of Tiong Polestar Engineering Pte Ltd (“the Company”). TAM obtained a garnishee order against United Overseas Bank (“the bank”) for money in the Company's bank account. A letter requesting payment was sent to the bank on 18 February. The bank only paid TAM on 25 February. Winding up proceedings against the Company were commenced on 24 February. The liquidator of the Company applied for the return of the moneys paid pursuant to the garnishee order. TAM argued that the bank had caused the delay in payment and the court should exercise its discretion under s 334 (1) (c) of the Companies Act (“CA”) to set aside the rights conferred on the liquidator.

The liquidator also applied for the return of money paid to TAM for rent and utilities in the two-year period prior to the commencement of winding up on the basis that these payments to TAM constituted an unfair preference. It was not disputed that TAM was an associate company under s 99 and 100 (1) (b) of the Bankruptcy Act (“BA”). TAM argued that the Companies (Application of Bankruptcy Act Provisions) Regulations (“the 1995 Regulations”) prescribed under s 411 CA by the Minister were ultra vires.The 1995 Regulations should have been made under the BA and not the CA. In issue was also whether TAM had adduced evidence sufficient to rebut the presumption that the payments were an unfair preference. TAM raised another two procedural objections - first, that the liquidator had no locus standi to make such an application, and second, that the application had been wrongly made using a summons-in-chambers when it should have been made via an originating summons.

Held, allowing the application:

(1) It was incumbent on a creditor to try and get payment as soon as possible. If receipt of payment was delayed by the act of another party, whether it was a bank or the bailiff, then the interests of general creditors would prevail: at [10].

(2) The definition of “prescribed” in s 2 CA included “prescribed under the Act” and “Act” was defined as including “any regulations”. As such the 1995 Regulations were valid whether prescribed under the CA or the regulations (s 411 CA) or the rules (s 410 CA): at [26] and [28].

(3) The 1995 Regulations were correctly made under the CA because they were intended to apply certain bankruptcy provisions to companies: at [32].

(4) The substantial lump sum payments made to cover arrears of rent constituted an unfair preference. The regular rental payments in the two-year period were fair: at [56].

(5) It was the person appointed as liquidator who should have made the application, whether it was the private liquidator or the Official Receiver. The intention of the CA was to give a liquidator who was not the Official Receiver as much powers as possible as would allow him to carry out his duties. There was nothing in the CA that expressly said that he had such powers and no others: at [61] and [66].

(6) The word “summons” in r 7 (2) of the Companies (Winding Up) Rules meant a summons-in-chambers and not an originating summons because the latter should be expressly stated if it were so: at [71] and [73].

Libra Industries Pte Ltd, Re [1999] 3 SLR (R) 205; [2000] 1 SLR 84 (refd)

Show Theatres Pte Ltd v Shaw Theatres Pte Ltd [2002] 2 SLR (R) 1143; [2002] 4 SLR 145 (refd)

Bankruptcy Act (Cap 20, 1996 Rev Ed) ss 98, 99, 100 (1) (b), 100 (1) (c), 101

Companies Act (Cap 50, 1994 Rev Ed) s 334 (1) (c) (consd);ss 2, 4 (1), 227T (1), 260, 272 (a), 273, 288, 305, 306, 329, 334, 410, 411

Companies (Application of Bankruptcy Act Provisions) Regulations (Cap 50, Rg 3, 1995 Ed) reg 3 (b)

Companies (Winding Up) Rules (Cap 50, R 1, 1990 Rev Ed) r 7 (2) (consd);rr 5 (1), 5 (2), 7 (1), 8 (1), 8 (2)

Interpretation Act (Cap 1, 2002 Rev Ed) s 22

Rules of Court (Cap 322, R 5, 1997 Rev Ed) O 1 r 2 (4);O 88 r 2 (1)

Mahendra Segeram (Segeram & Co) for the applicant

Cheong Yuen Hee and Sum Chong Mun (CM Sum & Co) for the respondent.

Judgment reserved.

Woo Bih Li J

Introduction

1 Tiong Polestar Engineering Pte Ltd (“the Company”) was a joint venture between a local company Tiong Asia Marine Pte Ltd (“TAM”) and Polestar Marine Engineering Co Ltd (“Polestar Japan”), a company incorporated under the laws of Japan. The Company was formerly known as Polestar Engineering (S) Pte Ltd. It was wound up by an Order of Court dated 24 March 2000 and Mr Jamshid Keki Medora was appointed as the liquidator (“the Liquidator”). The winding up petition on which the winding up order was made was presented on 24 February 2000.

2 In the matter before me, the Liquidator applied for various reliefs. I set out below the primary reliefs sought, using the same paragraph numbering as in his application:

(1a) a declaration that sums amounting to $1,247,190.03 or such other amounts paid by the Company to TAM between 23 February 1998 to 24 February 2000, constitute an unfair preference to TAM and are voidable accordingly;

(b) an order that TAM do pay the Company the sum of $1,247,190.03 or such other sum as may be determined by the Court.

(2a) a declaration that the purported rental increase by TAM on 1 December 1996 and 1 December 1997 in respect of the Company's premises at No 29 Tuas Basin Link Singapore constitutes a transaction at an undervalue within the meaning of s 329 of the Companies Act (Cap 50) (“CA”) (read with s 98 of the Bankruptcy Act (Cap 20)) (meaning the Bankruptcy Act 1995 which I will refer to as “BA 1995”) or alternatively, a declaration that these increases in rent constitute an unfair preference to TAM and therefore voidable accordingly;

(1) an order that TAM do repay the increased rental amounts to the Company from 1 December 1996 to the end of the Liquidator's possession of the premises.

(3a) a declaration that TAM is not entitled to retain the benefit of the execution or attachment pursuant to garnishee proceedings and amounting to $330,333.94 in view of s 260 CA read with s 334 CA; and

(2) an order that TAM do pay $330,333.94 to the Company.

3 In submissions before me, Mr Mahendra Segeram, counsel for the Liquidator, proceeded first with the challenge in respect of the moneys received by TAM pursuant to the garnishee proceedings (ie prayers 3 (a) and (b)) and then the challenge in respect of moneys received by TAM for rent and utilities within two years of the date of presentation of the petition of winding up (ie prayers 1 (a) and (b) but the two-year period should be 25 February 1998 to 24 February 2000). He did not proceed with the challenge pertaining to the increase in rent under prayers 2 (a) and (b).

$330,333.94 paid to TAM pursuant to garnishee proceedings

4 The $330,333.94 was paid by United Overseas Bank (“UOB”) to TAM by way of a cashier's order (“CO”) and a cover letter dated 24 February 2000 from UOB to TAM's solicitors M/s C M Sum & Co. It is undisputed that the CO was not received until 25 February 2000 and that the winding up petition against the Company was presented on 24 February 2000 ie one day earlier.

5 Although the challenge of the Liquidator was made under s 260 read with s 334 CA, Mr Segeram's submission focussed on s 334 CA.

6 Under s 334 (1) and (2) (b) CA, a creditor is not entitled to retain the benefit of any attachment of any debt as against the liquidator unless it has received the debt before the date of commencement of winding up.

7 It was also not disputed that the payment made by UOB was pursuant to a Garnishee Order Absolute obtained by TAM in an action (ie Suit No 600055 of 2000) and that such a garnishee order was an attachment by TAM of a debt due to the Company.

8 However, Mr Cheong Yuen Hee, counsel for TAM, submitted that the CO might constitute a loan from UOB to the Company and hence was the property of UOB and not that of the Company.

9 Iam of the view that the CO should not be considered in isolation and the circumstances which led to the issue of the CO were important. Although there was no...