RESISTING JUST AND EQUITABLE WINDING UP ON BASIS OF ADEQUATE ALTERNATIVE REMEDIES

• Citation: (1999) 11 SAcLJ 218
• Author: ANDRE YEAP ANDREW CHAN
• Date: 01 December 1999
• Published date: 01 December 1999

(A) Introduction

At least since 1889,1 the Singapore courts have had the power to wind up a company on the ground that it is just and equitable to do so. However, for over a century, there was uncertainty whether the Singapore courts would wind up a company on the just and equitable ground (assuming a case had been made out), where there exists another remedy which the petitioner (for the winding up) should reasonably have pursued instead of winding up.

One view is that the court has a discretion whether or not to order a winding up, where suitable alternative remedies exist. An opposing view is that where a case has been made out for the winding up of the company on the just and equitable ground, it should not matter that the petitioner has an alternative remedy. In other words, if the petitioner has made out his case for winding up, the remedy of winding up should ipso facto follow.

In the 1990s, or more than a century later, there has been three cases (2 from Singapore and the other from Malaysia) which, at first sight, suggest that the court has no discretion to refuse winding up, merely because there exists a suitable alternative remedy which the petitioner has refused to pursue. These cases are Tang Choon Keng Realty (Pte) Ltd and others v Tang Wee Cheng2 (“Tang Choon Keng”), Chong Choon Chai and Anor v Tan Gee Cheng and Anor3 (“Chong Choon Chai”), and Tien Ik Enterprises Sdn Bhd and others v Woodsville Sdn Bhd4 (“Tien Ik”).

It is, however, submitted for the reasons given in this Paper that the better view is, as far as Singapore is concerned, that it remains open to the local courts to consider the existence of an alternative remedy at the hearing on the merits (i.e. at trial) of a just and equitable petition. Next, this Paper shall consider the juridical basis for allowing a Singapore court

to take into account alternative remedies. Finally, this Paper considers some issues relating to the manner in which a Singapore court will evaluate the suitability of alternative remedies.

(B) The trilogy of cases

The first in time of these cases is Tang Choon Keng.5 In Tang Choon Keng,6 disputes arose between shareholders (who were also directors) of a company. One of the shareholders, P, then threatened to present both a winding petition on the just and equitable ground (“just and equitable petition”) and a petition under s216 of the Companies Act (“s216 application”).7 The opposing shareholders, O, then applied for and obtained ex parte an injunction to restraint P from presenting the petitions. P, thereafter, applied to set aside the injunction. The injunction was set aside by Chan Sek Keong J. (as he then was).

In arriving at his decision, Chan J. noted that the basis for the grant of the interim injunction to prevent a litigant from pursuing his statutory remedies (and in particular, a just and equitable petition) was to prevent an abuse of process.8 A litigant should, however, not be restrained from exercising them, except on clear and persuasive grounds.9 In other words, a litigant should only be restrained where the pursuit of the statutory remedies is bound to fail.10

On the facts, Chan J. held that a case had not been made out that the winding up petition and the s 216 application were bound to fail. More important, for the purposes of this Paper, Chan J. held that “the law in Singapore is that a member’s right to present a winding-up petition against his company cannot be restrained even if his complaint is sufficient to found another action for which another remedy is available. so long as the complaint, if substantiated, is also a sufficient ground to wind up the company.”11 (emphasis added)

In reaching the decision on this point, Chan J. distinguished several English12 and Australian13 authorities which supported the view that the court could take into consideration the existence of suitable alternative remedies, in refusing to wind up a company on a just and equitable petition.

In this respect, Chan J. noted that both England and Australia had statutory provisions which entitled the court to refuse to wind up a company, where suitable alternative remedies should reasonably have been pursued.14 For instance, section 225(2)(b) of the UK Companies Act 1948 (which was considered by Chan J.) provided that, “Where the [winding up] petition is presented by members of the company as contributors on the ground that it is just and equitable that the company should be wound up, the court if it is of the opinion……that.… it would be just and equitable that the company should be wound up…., shall make a winding up order, unless it is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy.”15

Similar provisions exist in Australia.16

The absence of such provisions under the Singapore Companies Act prompted Chan J. to hold that the position in Singapore was different, in that under Singapore law, the courts were not obliged to consider the existence of alternative remedies.17

The second case is Chong Choon Chai.18 In that case, an application was brought to strike out a just and equitable petition inter alia on the basis there were “suitable alternative remedies” which should be pursued. The Court of Appeal understood that by the use of the term “suitable alternative remedies”, the applicants meant the reliefs under s216 of the Companies Act. However, as no arguments were addressed to the court on the issue, the court merely said, “Suffice it here to say that the mere existence of a suitable alternative remedy as provided in s 216 is not a

good ground for striking out a winding up petition which on the face thereof is founded on substantial grounds.”19 No reference was made to Tang Choon Keng20 in the decision of the Court of Appeal.

The Malaysians have gone further.21 The Malaysian Supreme Court, in the case of Tien Ik Enterprises Sdn Bhd and others v Woodsville Sdn Bhd22 (“Tien Ik”), has held that it is not obligatory for a court to consider the existence of an alternative remedy at the trial stage of a just and equitable petition. In arriving at its decision, the Supreme Court approved of and followed the decision of Chan J in Tang Choon Keng.23

(C) Neither Chong Choon Chai24 nor Tang Choon Keng25 prevents the consideration by the Singapore courts of alternative remedies during the hearing on the merits of a just and equitable petition

Both Chong Choon Chai26 and Tang Choon Keng27 involved interlocutory hearings to inter alia strike out, and to prevent the presentation, respectively, of a just and equitable petition. As such, any suggestion in those cases in respect of the proper treatment of alternative remedies at the trial stage of a just and equitable petition, is at best obiter dicta. In this respect, there is a significant difference when considering the question of reasonableness of pursuing suitable alternative remedies, as between the trial stage and the interlocutory stage.28 In addition, the comments of

the Court of Appeal in Chong Choon Chai were made without the benefit of arguments,29 and hence would not constitute binding precedent.30

That having been said, the reasoning of Chan J. in Tan Choon Keng,31 may have wider implications (beyond interlocutory proceedings) affecting the relevance of alternative remedies to a hearing on the merits of a just and equitable petition. The Malaysian court in Tien Ik,32 for one, applied Tang Choon Keng33 in reaching its decision on the merits.

(D) The courts have taken into consideration alternative remedies prior to the enactment of the English and Australian provisions

The underlying premise of the decision in Tang Choon Keng,34 is that because Singapore does not have statutory provisions (as in England and Australia) which enables the court to take into account the existence of alternative remedies which the petitioner should reasonably have pursued, in deciding whether or not to wind up a company on the just and equitable ground, the position in Singapore is that their existence may not be taken into account.

It is the writers’ views, however, that the introduction of the statutory provisions in England and Australia did not alter the law.

In Charles Forte,35 Cross J. expressed the opinion that section 225(2) of the UK Companies Act did not alter the law.

Likewise in McPherson, The Law of Company Liquidation,36 which was written from the Australian perspective, the author takes the view in respect of the Australian provision “that it represents no more than a legislative expression of a principle which has always been recognized at general law.”

Accordingly, it is submitted that the non existence of similar provisions in the Singapore Companies Act, does not preclude the Singapore courts from considering the alternative remedies.

If, however, the English and Australian provisions altered the law, it is submitted that the law was altered only to the extent of introducing the test of reasonableness as the criterion of determining the relevance of alternative remedies.37 In this respect, there is some authority to suggest that the previous position in England was that the court would ordinarily not make a winding up order based on the “just and equitable” ground in cases where the petitioner had, or was thought to have, another remedy, and it did not matter that the alternative remedy was inadequate.38 This is a far stricter approach as compared with the test of reasonableness.

This stricter approach does not detract from the fact that alternative remedies were previously considered (i.e. prior to the enactment of the statutory provisions in Australia and England) when hearing a just and equitable petition. The difference of opinion relates only to the degree to which alternative remedies provides a basis to resist a just and equitable petition, but this is a separate...