Show Theatres Pte Ltd (in liquidation) v Shaw Theatres Pte Ltd and Another

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
JudgeChao Hick Tin JA
Judgment Date05 October 2002
Neutral Citation[2002] SGCA 42
Citation[2002] SGCA 42
Published date19 September 2003
Docket NumberCivil Appeal No 37 of 2002
Plaintiff CounselLee Eng Beng and Lynette Lee ( Rajah & Tann )
Date05 October 2002
Defendant CounselTan Kok Quan SC, Tang Khin Wai and Dawn Chew ( Tan Kok Quan Partnership )

Judgment

GROUNDS OF DECISION

1 This appeal raised the question as to the meaning of the term "associate" in the context of determining whether payments made by a company under liquidation to another company were payments made to a "person connected" with the company, thus rendering the payments made an unfair preference over other creditors of the company. The point involved construing certain provisions in the Bankruptcy Act, which are made to apply to the winding up or judicial management of a company.

2 The court below held that the payments made by the appellants, Show Theatres, to the two respondents (hereinafter referred to separately as "Shaw Pte" and "Eng Wah Pte" respectively) were not payments made to "persons connected" with the appellants and as those payments were made more than six months before Show Theatres were placed under liquidation, the liquidator of Show Theatres (the liquidator) was not entitled to recover the payment from the two respondents.

3 On 13 September 2002, we heard the appeal lodged by the liquidator and held that Shaw Pte and Eng Wah Pte were "persons connected" with Show Theatres. As the payments were made to the former within two years prior to the liquidation of Show Theatre, the payments were presumed to constitute unfair preference. Therefore, the liquidator was entitled to recover the same from Shaw Pte and Eng Wah Pte. We now give our reasons.

The facts

4 The facts giving rise to the action were these. Show Theatres were incorporated by Shaw Pte and Eng Wah Pte in 1993, with the former holding 75% of its shares and the latter, 25%. Shaw Pte was represented on the board of directors by Mr Shaw Vee Chung Harold and Mr Shaw Vee King (the two Shaws) and Eng Wah Pte by Mr Goh Keng Beng. The two Shaws and Goh Keng Beng were also directors of Shaw Pte and Eng Wah Pte respectively.

5 Sometime in 1997, Show Theatres called on their shareholders to provide funds by way of loans to the company which were required for their business needs. One of the purposes was in relation to the purchase of shares in Chinatown Point and, for that, Show Theatres needed a sum of $500,000. This sum was furnished by Shaw Pte and Eng Wah Pte in the proportion of their shareholdings in Show Theatres, i.e., $375,000 and $125,000 respectively.

6 Some two years later, on 6 August 1999, the two sums were repaid by Show Theatres to the two respondents. It was common ground that at the time of the repayments, Show Theatres were insolvent. The repayments were made more than six months, but less than two years, before the presentation of the winding up petition.

7 On 24 October 2000, a creditor of Show Theatres presented a petition for the company to be wound up. The winding-up order was granted on 17 November 2000. The liquidator, after reviewing the records and accounts of the company, thought that the two repayments constituted unfair preference and thus applied to court to have the two sums restored to the company.

8 In the court below, the respondents raised three arguments to resist the liquidator’s application. First, that the two sums were, in fact, moneys held by Show Theatres on a trust, of the nature enunciated in Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567, for both the respondents. Second, that the rules laid down in the Companies (Applications of Bankruptcy Act Provisions) Regulations [CABAR] were not valid as the Minister had no such power to make them. Third, as the respondents were not "persons connected" with Show Theatres and as the repayments were not made to them during the period of six months before the winding up of the company, the presumption of unfair preference did not arise and the payments were in order.

The issue

9 Before us, there was really only one issue. Were Shaw Pte and Eng Wah Pte "persons connected with" Show Theatres when the repayments were made to them? The answer to this question in turn depends on the meaning to be given to the term "associate" in the definition of a "person connected with a company" laid down in CABAR. The two other issues taken in the court below were, quite rightly, not seriously pursued before us. They were adequately dealt with by the court below.

Relevant provisions

10 Section 329(1) of the Companies Act (Cap 50) provides that –

    Subject to this Act and such modifications as may be prescribed, any transfer, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company which, had it been made or done by or against an individual, would in his bankruptcy be void or voidable under section 98, 99 or 103 of the Bankruptcy Act 1995 (read with sections 100, 101 and 102 thereof) shall in the event of the company being wound up be void or voidable in...

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