Sinfeng Marine Services Pte Ltd v Taylor, Joshua James and another and other appeals

• Jurisdiction: Singapore
• Court: Court of Appeal (Singapore)
• Judge: Tay Yong Kwang JA
• Judgment Date: 09 October 2020
• Neutral Citation: [2020] SGCA 96
• Citation: [2020] SGCA 96
• Published date: 20 October 2020
• Plaintiff Counsel: Kenneth Tan SC (instructed counsel), Tan Poh Ling Wendy and Carl Lim Kok Wee (Morgan Lewis Stamford LLC),Jude P. Benny and Mary-Anne Chua (Joseph Tan Jude Benny LLP)
• Defendant Counsel: Sim Kwan Kiat, Timothy Ang Wei Kiat, Chow Jie Ying and Leonard Huo (Rajah & Tann Singapore LLP)
• Date: 09 October 2020
• Hearing Date: 11 June 2020
• Docket Number: Civil Appeal Nos 188, 189 and 190 of 2019
• Subject Matter: Application to Court to have questions determined or powers exercised,Insolvency Law,ss 285 and 310 of the Companies Act (Cap 50, 2006 Rev Ed),Costs of compliance,Creditors' appointed liquidators,Winding up,Order for examination

Belinda Ang Saw Ean J (delivering the judgment of the court): Introduction

Coastal Oil Singapore Pte Ltd (“the Company”) was placed in a creditors’ voluntary winding up with 13 December 2018 being the commencement date of the creditors’ voluntary winding up pursuant to s 291(6) of the Companies Act (Cap 50, 2006 Rev Ed) (effective prior to 30 July 2020) (“CA”). The respondents are the current joint and several liquidators of the Company. The appellants in CA/CA 188/2019, CA/CA 189/2019 and CA/CA 190/2019 (“CA 188”, “CA 189” and “CA 190” respectively) seek a discharge of the orders for the production of documents made against each of them pursuant to s 285 of the CA. Besides examining the appellants’ contention that the orders for production were, in the circumstances unreasonable and oppressive, this judgment will consider the anterior question of whether an application under s 310(1)(b) of the CA is required to extend the powers of examination of persons and production of documents under s 285 of the CA to a creditors’ voluntary winding up. To the appellants, the anterior question on s 310(1)(b) is an important issue that would determine the appeals in limine. The respondents disagree as their stance in opposition, amongst other things, is that as liquidators, they have a right to directly apply for an order for examination and/or production of documents under s 285 alone. This judgment will examine the competing views outlined here.

Events leading to the s 285 applications made by the respondents

We begin with a brief narration of facts relating to the Company and the appellants before highlighting the main events that led to the respondents’ applications made under s 285 of the CA by way of HC/OS 419/2019, HC/OS 420/2019 and HC/OS 421/2019 (“the s 285 applications”).

The Company was incorporated in Singapore on 28 October 2004 and was, at all material times, in the business of wholesale distribution of petroleum and petroleum products. As a bunker supplying company, it also traded in marine fuel and related products. The directors of the Company were Mr Tan Sin Hwa (“Mr Tan”) and Mr Yeung Wing Sing (“Mr Yeung”) who each held 50% of the shares in Coastal Holdings Ltd, the parent company of the Company.

The appellant in CA 188 is Sinfeng Marine Pte Ltd (“Sinfeng”). Sinfeng was one of the Company’s main trading partners between 2012 and 2018. Sinfeng is engaged in the supply and trading of marine fuel and related products. Cosco Petroleum Pte Ltd (“Cosco”), the appellant in CA 189, was one of the Company’s main customers from late 2015 to around April 2017. Cosco and Sinfeng are subsidiaries of Cosco Shipping International (Hong Kong) Co. Ltd (“Cosco (HK)”). The appellant in CA 190 is Costank (S) Pte Ltd (“Costank”). Costank is in the business of trading and supplying oil bunkers and was one of the Company’s main suppliers from 2012 to 2018. Mr Tan is a director and a 49% shareholder in Costank.

The Company owed US$357m to 79 companies, of which US$354m was owed to major banks. Saddled with hefty debts, the Company was placed in a creditors’ voluntary winding up. Mr Abuthahir Abdul Gafoor was appointed as its provisional liquidator on 13 December 2018. On 28 December 2018, Mr Andrew Grimmett and Mr Lim Loo Khoon (“Mr Lim”) were appointed the joint and several liquidators of the Company. During a creditors’ meeting on 28 December 2018, Mr Haridass Ajaib (“Mr Haridass”), the Company’s legal advisor, notified the parties present that Mr Tan had admitted to him, sometime in early December 2018, that Mr Tan had prepared fraudulent documents “purportedly for trades carried out by the Company and these documents were used for bank financing” (“the Admission”).¹ On 8 January 2019, Mr Haridass informed Mr Lim that Mr Tan had “began entering into fraudulent transactions since 2013/2014” and that the fraudulent documents referred to were “contracts for the sale of oil cargoes”. Mr Tan did not give details of these transactions though he had identified some of the creditor banks involved.² Mr Tan has since remained uncontactable. On 10 January 2019, a creditors’ meeting was convened to approve a change in liquidators. Pursuant to this meeting, the respondents were appointed and took over as the joint and several liquidators of the Company and learnt of the circumstances mentioned here.

On 4 January 2019, Cosco (HK) issued a public announcement on the Hong Kong Stock Exchange (“the Announcement”). The Announcement stated that a number of commercial banks had claimed payment of assigned receivables due from Sinfeng to the Company (“the assigned receivables”). The Announcement also stated that Sinfeng’s management was of the preliminary view that the “documents in relation to almost all of the [assigned receivables were] not genuine”.³ In the light of the Announcement, the respondents requested full details of all the documents and transactions that had been identified as “not genuine”. Sinfeng provided the documentation on 29 January 2019. The documents that Sinfeng provided were ostensibly created between August and November 2018 and they included invoices, sale contracts, notices of assignment, bunker delivery notes, bills of lading and certificates of quality.

From the respondents’ interviews with two of the Company’s main suppliers of bunker, Arkananta Yasa Pte Ltd (“Yasa”) and Mewah Logistics Pte Ltd (“Mewah”), the respondents learnt that there were tripartite trading loops involving entities such as Sinfeng/Cosco, the Company and Yasa and in other trade loops, entities such as Costank, the Company and Mewah. In those tripartite trading loops, the same goods were sold by the appellants to Yasa/Mewah, then to the Company, and then back to the appellants. Following the interviews, in February 2019, the respondents requested the appellants’ records and documents in relation to its trading relationship, transactions and payment invoices with the Company for the period between 1 January 2016 and 31 December 2018. The appellants refused the respondents’ requests, generally on the basis that the documents sought were not necessary or reasonable.

In April 2019, the respondents filed the s 285 applications. The respondents applied for examination of persons and the production of a whole range of documents (hereafter collectively referred to as “the Third Party Documents”): a general description of the trading relationship between the Company and the appellants, including the nature of the trading activities, periods of time of the relationship, and any other information relevant to explain the relationship and business dealings with the Company; copies of sales contracts between the Company and the appellants with respect to trading or other activities; copies of invoices issued by the Company to the appellants and the accompanying delivery documentation, eg, Bill of Lading, Bunker Delivery Note; copies of debit or credit notes issued by the appellants to the Company evidencing adjustments to the amount due per invoice issued by the Company; copies of the appellants’ proof of payment which show the payments the appellants made to the Company and/or monthly or any other periodic summary of payments made by the appellants to the Company; documentation, including invoices, debit notes, credit notes, contracts, delivery documents and payment proof relating to the onward buyer(s) of products supplied by the Company to the appellants during the period; and documentation, including invoices, debit notes, credit notes, contracts, delivery documents and payment proof relating to the initial supplier(s) of products supplied by Sinfeng and Costank to the Company.

The respondents sought the Third Party Documents at (a)–(f) above against Cosco (for the period 1 July 2012 to 13 December 2018), and all of the Third Party Documents listed above against Sinfeng (for the period 1 January 2012 to 2 April 2019) and Costank (for the period 1 July 2012 to 13 December 2018).

The decision below

On 12 July 2019, the High Court judge (“the Judge”) substantially ordered production of the Third Party Documents sought. The Judge accepted the respondents’ contention that the bulk of the Third Party Documents was reasonably required as the respondents were duty-bound to determine the events that led to the Company’s demise. The Judge held that the respondents could not solely rely on the records kept by the Company, and ascertaining whether there were any discrepancies between the records kept by the Company and the appellants would be helpful in identifying any fraudulent transactions in the light of Mr Tan’s admission that he had perpetrated fraud in relation to the Company’s trades since 2013 or 2014. Accordingly, the order to produce, directed at third parties, was for the period between 1 July 2012 and 13 December 2018, except for “copies of debit or credit notes issued by the [appellants] to the Company” (see [8(d)] above) (“the Production Orders”). As regards the excluded documents, the Judge accepted that the expense of producing them outweighed their utility.

The Judge made no order on the prayer for an examination of persons. However, the Judge granted the respondents liberty to re-apply for an examination order in the future.

Main issues in the three appeals

The appellants appealed against the Judge’s decision to grant the Production Orders. Before the hearing of these appeals in June 2020, the respondents, on 16 March 2020, applied in CA/SUM 37/2020, CA/SUM 38/2020 and CA/SUM 39/2020 for leave to adduce the statutory declarations of Mr Lim Pong, a director of Mewah, dated 19 August 2019 (“Mr Lim Pong’s Statutory Declaration”) and of Mr Ong Ah Huat (“Mr Ong”), the former Chief Financial Officer of the Company, dated 26 June 2019 (“Mr Ong’s Statutory Declaration”). Mr Lim Pong and Mr Ong’s Statutory Declarations were obtained pursuant to the respondents’ application for them...