SAAG Oilfield Engineering (S) Pte Ltd v Shaik Abu Bakar bin Abdul Sukol

• Jurisdiction: Singapore
• Judgment Date: 30 January 2012
• Date: 30 January 2012
• Docket Number: Civil Appeals Nos 55 and 56 of 2011
• Court: Court of Appeal (Singapore)

SAAG Oilfield Engineering (S) Pte Ltd (formerly known as Derrick Services Singapore Pte Ltd)

Plaintiff

and

Shaik Abu Bakar bin Abdul Sukol and another and another appeal

Defendant

[2012] SGCA 7

Chao Hick Tin JA

,

Andrew Phang Boon Leong JA

and

V K Rajah JA

Civil Appeals Nos 55 and 56 of 2011

Court of Appeal

Companies—Schemes of arrangement—Workmen pursuing common law tort claim for compensation against company—Company undergoing scheme of arrangement—Workmen not participating—Whether workmen were ‘creditors’ under s 210 Companies Act (Cap 50, 2006 Rev Ed) or ‘Scheme Creditors’ under scheme of arrangement—Whether workmen's causes of action extinguished by scheme of arrangement—Section 210 Companies Act (Cap 50, 2006 Rev Ed)

The first respondent in Civil Appeal No 55 of 2011 and the respondent in Civil Appeal No 66 of 2011 were workmen (‘the respondent workmen’) employed by the appellant company who sustained industrial injuries in the course of their employment. The respondent workmen lodged statutory claims for workmen's compensation under the Workmen's Compensation Act (Cap 354, 1998 Rev Ed) (‘WCA’).

A meeting of ‘Scheme Creditors’ was held on 25 July 2008 pursuant to an order of court under s 210 (1) of the Companies Act (Cap 50, 2006 Rev Ed), during which the scheme was unanimously approved, but neither of the respondent workmen were present at or participated in the meeting. The scheme of arrangement was approved by the court on 25 August 2008 under ss 210 (3) and 210 (4) of the Companies Act. By 22 October 2008 - the deadline provided by the Scheme for Scheme Creditors to submit proofs of debt to be dealt with under the Scheme - neither of the respondent workmen had submitted any proof of debt, and thereafter neither participated in or received payments under the Scheme, which was terminated as per its terms on 4 May 2009.

Subsequently, the respondent workmen decided to withdraw their WCA claims and proceed with their common law claims.

The High Court judge was asked, under O 14 r 12 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed), to determine whether the respondent workmen's causes of action had been extinguished or barred by the scheme of arrangement. He found that a scheme of arrangement carried out in compliance with ss 210 to 212 of the Companies Act did not bind tort claimants (whose claims were necessarily for an unliquidated sum) who did not participate in the scheme and whose claims were covered by a valid policy of insurance, allowing such claimants to commence and maintain common law tort claims against the company notwithstanding the completion of the scheme. The judge accordingly decided the O 14 r 12 question in the negative and the appellant company appealed against his decision.

Held, allowing the appeal:

(1) The fact that the claims were covered by insurance made no difference in determining whether a claimant was a ‘creditor’ under s 210 of Companies Act. If the existence of insurance was the touchstone, any claim (not just claims for unliquidated damages in tort) which was covered by a policy of insurance (or, for that matter, by contracts of guarantee or indemnity) would not be included within s 210 of the Companies Act. That would mean that all manner of judgment or agreed creditors for liquidated damages in contract or breach of statutory duty, not to mention those whose entitlements to damages have yet to accrue, would thereby be deemed not to be ‘creditors’ for the purpose of s 210, and would therefore not be bound by any scheme of arrangement entered into. This ran contrary to the object of s 210: at [47].

(2) To exclude tort claimants from the ambit of the term ‘creditors’ would render s 210 of the Companies Act rather pointless as they might potentially form a substantial (or even the entire) class of a company's creditors: at [48].

(3) The Appellant was considered ‘liable’ to the Respondents notwithstanding that it was indemnified against that liability by virtue of its policy of insurance with its insurer. Therefore, on the true construction of the relevant terms of the Scheme, the Appellant clearly ‘is or may be liable to’ the Respondents in respect of a ‘Liability’, and consequently the Respondents were indeed ‘Scheme Creditors’ within the meaning of the Scheme: at [57].

(4) A scheme of arrangement was not an ordinary contract, but a statutory one. Parliament had, by s 210 (3) of the Companies Act, made an exception to the normal requirement of consideration: as long as the requisite statutory majority of creditors promise to be bound by the scheme of arrangement (and receive the specified consideration in exchange), then all creditors would be bound by the scheme, even those who did not so promise or receive consideration thereby. Thus, it was difficult to see how there was any room for asserting that a creditor (who was intended to be bound by the scheme) was not bound because he did not consent to or participate in the scheme and therefore did not receive any payouts: at [61] and [62].

(5) The result was not an unjust one, because, under the terms of the Scheme, both Respondents still had recourse to their WCA claims. While the amount of compensation recoverable under the WCA would likely be less than that recoverable under common law, the Respondents had no real cause for complaint, for in a scheme of arrangement situation, all unsecured creditors of a company would be expected to take a ‘haircut’ and receive less than the full amount of their claims, in return for avoiding a winding up of the company (which would likely result in even smaller sums being returned to them): at [65] and [66].

[Observation: It was fortuitous, however, that the Respondents could still rely on their WCA claims. The Appellant's other tort claimants who were not aware of and/or did not participate in the Scheme might not be so fortunate, and could find their claims entirely barred without their knowledge, as a result of the wide approach to the meaning of the word ‘creditors’ in s 210 of the Companies Act: at [67].

Where a catch-all definition of creditors in the scheme is employed, evidence should normally be adduced, from a responsible officer of the company, to the effect that the company had received no notice of any pecuniary claim against it and that the deponent was not aware of any circumstances likely to give rise to a pecuniary claim against the company, other than as revealed to the court. It would, in many such cases, also be appropriate to qualify the definition by adding an exclusion along the following lines: ‘excluding any person having a claim in respect of which the company is entitled to indemnity under a policy of insurance, to the extent of the amount recoverable under such policy in respect of such claim’: at [68].]

BDC Investments Ltd, Re (1988) 13 ACLR 201 (refd)

Bond Corp Holdings Ltd v Western Australia (1992) 7 ACSR 472 (refd)

Cancol Ltd, Re [1996] 1 All ER 37 (folld)

Glendale Land Development Ltd (in liquidation) , Re (1982) 7 ACLR 171 (folld)

Midland Coal, Coke, and Iron Co, Re [1895] 1 Ch 267 (folld)

Pacrim Investments Pte Ltd v Tan Mui Keow Claire [2010] SGHC 134 (folld)

Pacrim Investments Pte Ltd v Tan Mui Keow Claire [2011] 2 SLR 438 (folld)

Oriental Insurance Co Ltd, The v Reliance National Asia Re Pte Ltd [2008] 3 SLR (R) 121; [2008] 3 SLR 121 (refd)

R L Child & Co Pty Ltd, Re (1986) 10 ACLR 673 (folld)

Smith v Carr (1993) 60 ACSR 346 (refd)

Southern Australia Perpetual Forests Ltd, Re [1971] VR 475 (refd)

T & N Ltd, Re [2006] 1 WLR 1728 (folld)

T & N Ltd (No 3) , Re [2007] 1 All ER 851 (folld)

Trocko v Renlita Products Pty Ltd; The Commonwealth Trading Bank and Shepherd (Claimants) (1973) 5 SASR 207 (not folld)

Waymouth Guarantee and Discount Co Ltd, Re (1974) 10 SASR 407 (distd)

Bankruptcy Act (Cap 20, 2009 Rev Ed) s 87 (1)

Companies Act (Cap 50, 2006 Rev Ed) ss 210, 327 (1) , 327 (2) (consd) ; ss 210 (1) , 210 (2) , 210 (3) , 210 (4) , 211, 212

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 14 r 12

Workmen's Compensation Act (Cap 354, 1998 Rev Ed)

Bankruptcy Act 1966 (Cth) s 82 (2)

Companies Act 1948 (c 38) (UK) s 206

Companies Act 1985 (c 6) (UK) s 425

Companies Act 2006 (c 46) (UK) s 896

Companies Act 1962-1972 (SA) ss 181, 181 (2) , 291 (1)

Companies (NSW) Codess 315, 438 (1) , 438 (2)

Joint Stock Companies Arrangement Act 1870 (c 104) (UK) s 2

Tito Isaac, Justin Chan, Ho Seng Giap and Denyse Yeo (Tito Isaac & Co LLP) for the appellant in Civil Appeals Nos 55 and 56 of 2011

Krishna Morthy and Udeh Kumar s/o Sethuraju (SKKumar Law Practice LLP) for the first respondent in Civil Appeal No 55 of 2011

KAnparasan and Grace Tan (Khattar Wong) for the second respondent in Civil Appeal No 55 of 2011

Ramasamy KChettiar (Acies Law LLC) and Nasser Ismail (Md Nasser Ismail & Co) for the respondent in Civil Appeal No 56 of 2011.

Chao Hick Tin JA

(delivering the grounds of decision of the court):

Introduction

1 The present appeals,viz, Civil Appeal No 55 of 2011 (‘CA 55/2011’) and Civil Appeal No 56 of 2011 (‘CA 56/2011’), were appeals from the decision of the High Court judge (‘the Judge’) in, respectively, Summons No 4266 of 2010 in Suit No 717 of 2009 (‘S 717/2009’) and Summons No 2768 of 2010 in Suit No 183 of 2010 (‘S 183/2010’), wherein he determined the following question of law posed under O 14 r 12 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) in the negative (see Azman bin Kamis v Saag Oilfield Engineering (S) Pte Ltd (formerly known as Derrick Services Singapore Pte Ltd) [2011] 4 SLR 825 (‘the GD’) at [1]):

Whether the ... causes of action [of the first respondent in CA 55/2011 and the respondent in CA 56/2011] ... against the [appellant in the present appeals] have been extinguished and/or barred and/or precluded from being maintained consequent to the Scheme of Compromise and Arrangement dated 3 July 2008 which has...