Re Wan Soon Construction Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 14 June 2005
• Date: 14 June 2005
• Docket Number: Originating Petition No 8 of 2004
• Court: High Court (Singapore)

Re Wan Soon Construction Pte Ltd

[2005] SGHC 102

Andrew Phang Boon Leong JC

Originating Petition No 8 of 2004

High Court

Credit and Security–Remedies–Writs of seizure and sale–Respondent unsecured creditor obtaining and registering writ of seizure and sale against company's property before company placed under judicial management–Writ not executed before commencement of judicial management of company–Whether respondent entitled to proceeds of sale of company's property–Whether court should empower judicial managers to set aside incomplete execution of writ of seizure and sale against company–Sections 227X and 334 (1) Companies Act (Cap 50, 1994 Rev Ed)

Wan Soon Construction Pte Ltd (“the company”) petitioned for a judicial management order on 22 July 2004 and was placed under judicial management on 1 October 2004.

On the same day that the company petitioned for judicial management, the company granted an option for purchase of its property to Ad Graphic Pte Ltd (“the purchaser”). The purchaser exercised the option on 17 September 2004. The judicial managers adopted the sale after being informed of the existence and exercise of the option. Completion was fixed for 23 January 2005.

Prior to these events, the respondent had obtained final judgment in a suit against the company for the sum of US$500,000 on 31 May 2004. The respondent obtained a writ of seizure and sale (“WSS”) against the company's property on 19 June 2004 and registered the WSS against the property on 28 June 2004.

On 17 January 2005, the High Court ordered the respondent to remove the WSS to enable the company to complete the sale of the property on 23 January 2005. The company applied to the High Court in the present suit for a declaration that the respondent was not entitled to the proceeds of sale of the company's property in priority to the general body of unsecured creditors to satisfy its judgment against the company after the WSS had been removed.

The issues that fell to be decided by the court pertained to: (a) the legal effect of the respondent's WSS; (b) whether the WSS conferred upon the respondent the legal right to the entire proceeds of the sale of the company's property and, if so, on what legal basis; and (c) whether the rights (of the company and its other creditors) trumped the respondent's right, and the legal basis for this.

Held, allowing the company's application:

(1) Although it was clear that the pari passu principle applied with regard to unsecured creditors in the context of a winding up, the court was not persuaded that the principle ought to apply in the context of judicial management: at [24] and [25].

(2) Section 227X (b)of the Companies Act (Cap 50, 1994 Rev Ed) was intended to ensure that where the provisions relating to liquidation in Pt X of the Companies Act were appropriate in facilitating the general mission and purpose of judicial management, those provisions should, in addition to the four specific provisions expressly set out in s 227X (b) itself, apply where, in the court's discretion, this was appropriate: at [36].

(3) There was no pat formula regarding when the court could order s 334 of the Companies Act to apply pursuant to the power conferred under s 227X (b) of the same Act. However, there could be broad guidelines, the most important guideline being whether application of the provision would inure to the benefit of the unsecured creditors generally and/or aid the company in its attempt at economic recovery: at [50].

(4) On the facts of the present case, allowing s 334 to apply pursuant to the power conferred under s 227X (b) would indeed conduce towards the benefit of the company in general and unsecured creditors in particular: at [51].

(5) As the respondent was an unsecured creditor, there was no reason, in principle, why it ought to be allowed to steal a march on the remaining unsecured creditors, and in this respect, the application of s 334 would ensure that this did not occur. On the other hand, if the respondent had, in fact, completed execution of the said WSS, it would have reaped the full benefits concerned: at [51].

(6) It did not follow that a WSS that was registered but unexecuted was of no legal effect whatsoever. It would clearly take priority over other WSS registered against the same property or assets of the company had it been registered first: at [52].

Atlantic Computer Systems Plc, In re [1992] Ch 505 (folld)

Boonann Construction Pte Ltd, Re [2000] 2 SLR (R) 399; [2002] 3 SLR 338 (refd)

Chew Eu Hock Construction Co Pte Ltd v Central Provident Fund Board [2003] 4 SLR (R) 137; [2003] 4 SLR 137 (refd)

Electro Magnetic (S) Ltd v Development Bank of Singapore Ltd [1994] 1 SLR (R) 574; [1994] 1 SLR 734 (folld)

ERPIMA SA v Chee Yoh Chuang [1997] 1 SLR (R) 923; [1998] 1 SLR 83 (distd)

Hinckley Singapore Trading Pte Ltd v Sogo Department Stores (S) Pte Ltd [2001] 3 SLR (R) 119; [2001] 4 SLR 154 (folld)

Hitachi Plant Engineering & Construction Co Ltd v Eltraco International Pte Ltd [2003] 4 SLR (R) 384; [2003] 4 SLR 384 (folld)

Joo Yee Construction Pte Ltd v Diethelm Industries Pte Ltd [1990] 1 SLR (R) 171; [1990] SLR 278 (folld)

Lim Chiak Kim, a bankrupt, Official Assignee of the estate of v United Overseas Bank Ltd [1988] 2 SLR (R) 88; [1988] SLR 52 (refd)

Overseas Aviation Engineering (GB) Ltd, In re [1963] Ch 24 (folld)

Companies Act (Cap 50, 1994 Rev Ed) ss 227X, 334 (consd);ss 227A (b), 227B (1) (b), 337, 340, 341, 342

Kelvin Poon Kin Mun (Rajah & Tann) for the applicant

Leung Wing Wah (Sim & Wong LLC) for the respondent.

Andrew Phang Boon Leong JC

Introduction

1 The present case witnessed the confluence of company law and land law - the former constituting the broader canvas on which the details of the latter operated. It bears mentioning that these two areas of the law are both technical and (on occasion at least) complex. However, their importance - particularly in the commercial sphere - cannot be gainsaid and the present proceedings illustrate this point with limpid clarity.

2 Wan Soon Construction Pte Ltd (“the company”) petitioned for a judicial management order on 22 July 2004. It was placed under judicial management on 1 October 2004.

3 On the same day it petitioned for a judicial management order (viz 22 July 2004), the company granted an option for the purchase of its property to Ad Graphic Pte Ltd (“the purchaser”). This property comprised a 30-year Jurong Town Corporation (“JTC”) lease at 12 Loyang Lane (“the company's property”), which property is mortgaged to Singapura Finance Limited (“SFL”), which is now known as Hong Leong Finance Limited.

4 The purchaser exercised the option on 17 September 2004. Both JTC and SFL gave their consent to the sale. The judicial managers also adopted the sale after being informed of the existence and (more importantly) of the exercise of the said option. They were of the view, inter alia, that the purchase price for the property was reasonable and that the said sale would ultimately benefit the company's creditors as a whole. Completion was fixed for 23 January 2005.

5 However, prior to the above events, the respondent in the present proceedings, Deschen Holdings Ltd, had, on 31 May 2004, obtained final judgment in a suit (Suit No 411 of 2004) against the company in the sum of US$500,000 (together with interest and costs).

6 The respondent had then obtained a writ of seizure and sale (“WSS”) against the company's property on 19 June 2004, and had registered the WSS against the property on 28 June 2004.

7 It should be noted that the respondent's actions with respect to the WSS took place prior to the granting of the option for the purchase of the company's property and its acceptance by the purchaser, and also prior to the petition for (and placement under) judicial management. Indeed, neither the judicial managers nor the respondent alleges either fraud or bad faith on the other's part. The issue here is, at its most basic level, a straightforward one: What is the legal effect of the respondent's WSS? Did it confer upon the respondent the legal right to the entire proceeds of the sale of the company's property? If so, what was the legal basis? If not, what were the rights (of the company and its other...