Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and Others

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 28 April 2004
• Neutral Citation: [2004] SGHC 84
• Date: 28 April 2004
• Subject Matter: Protection of property,Whether plaintiff acted oppressively,Purposes for grant,Sections 339(1), 339(3), 340(1), 409A Companies Act (Cap 50, 1994 Rev Ed),Injunctions,Failure to make full and frank disclosure of material facts
• Docket Number: Suit No 864 of 2003
• Published date: 04 May 2004
• Defendant Counsel: Daniel John and Lim Fung Peen (John, Tan and Chan),Daryll Ng (Haridass Ho and Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: P Suppiah and Elengovan Krishnan (P Suppiah and Co)

28 April 2004

Lai Kew Chai J:

1 On 5 September 2003, the plaintiff, trading as Niklex Supply Company, obtained interim injunctions against the defendants enjoining them from disposing or otherwise dealing with the goods and assets belonging to a company known as Amrae Benchuan Trading Pte Ltd (“Amrae Benchuan”), which were alleged to be in the possession and control of seven companies and one sole-proprietorship. The first defendant (“Lek”) and the second defendant (“Lim”) were directors of Amrae Benchuan. They were alleged to be linked to the eight entities. At the material times, the plaintiff had sold Bohemian crystals on credit to Amrae Benchuan. Over the years of transactions, the outstanding sum unpaid was alleged to be $1,544,214.02.

2 The High Court granted the injunctions and made other orders, to which I will revert, under s 409A of the Companies Act (Cap 50, 1994 Rev Ed). This new section promulgated by Act No 13 of 1987 empowers the court to grant interim and final injunctions to restrain, inter alia, threatened or actual offences against the Act. It also requires a person to do an act he has refused or failed to do. The court may rescind or vary an injunction granted. It may also order a person to pay damages. As it is statutory, the discretionary factors which a court should take into account may not be coincident with, and in certain circumstances may be outwith, those which would operate when a court is exercising its traditional equitable jurisdiction. I shall later in this judgment consider more fully the scope of the statutory injunction provided for under the Companies Act, including its relationship with equitable principles governing injunctions.

3 In support of her application for the injunction, the plaintiff alleged that the defendants had actually contravened ss 339(1), 339(3) and 340(1) of the Companies Act. The first allegation has to do with proper accounts; this allegation was hardly referred to in submissions. Section 339(1) imposes liability where proper accounts are not kept by officers of the company in question. It imposes liability on every officer where it is shown that proper books of account were not kept by the company throughout the period of two years and the commencement of the investigation. The prescribed punishment is a fine not exceeding $5,000 or to imprisonment for a term not exceeding one year.

4 The contravention of the Companies Act, which was heavily relied upon by the plaintiff, was that of s 339(3) of the Companies Act. If it appears that any business of a company has been carried on with intent to defraud creditors of the company or for any fraudulent purpose, a court may declare the person who was knowingly a party to the carrying on of business in that manner to be personally responsible for all or any of the debts or other liabilities of the company as the court directs.

5 Lastly, the plaintiff also relied on the alleged responsibility of the defendants for fraudulent trading in contravention of s 340(1) of the Companies Act. She alleged that the business of Amrae Benchuan had been carried on with intent to defraud creditors of the company in contravention of s 340(1) of the Companies Act. The plaintiff sought a declaration that the defendants are personally responsible to her for the debt of Amrae Benchuan.

The interim orders

6 As noted earlier, each of the defendants was restrained until further order from selling or otherwise disposing of the goods and assets belonging to Amrae Benchuan which were allegedly, at the time of the application for interim orders, in the custody, control and possession of eight entities named in the order. They are Axum Marketing Pte Ltd (“Axum”); Amrae Benchuan International Pte Ltd (“AB International”); Amrae Benchuan Sdn Bhd, a Malaysian incorporated company (“Amrae Malaysia”); Concept Gifts, a sole-proprietorship (“the sole-proprietorship”); Concept Gifts Pte Ltd (“Concept Gifts Singapore”); Concept Gift (M) Sdn Bhd (“Concept Gift (M)”); Edge Point (M) Sdn Bhd (“Edge Point (M)”) and Edge Point (S) Pte Ltd (“Edge Point”).

7 Each of the three defendants was further ordered to cause each of the eight abovenamed entities to transfer all the goods and assets in their possession, custody or control back to Amrae Benchuan for no consideration.

8 Each of the defendants were also ordered to disclose all their assets, both in Singapore and outside Singapore, which they own legally or beneficially, giving the value, location and details of all such assets including the goods and assets of Amrae Benchuan. The defendants were ordered to confirm their disclosures in an affidavit to be served within seven days after service of the order.

Discharge of injunctions

9 As the result of the injunctive and mandatory orders, the businesses of the three defendants were brought to a grinding halt. Despite the discharge of the injunctive and mandatory orders on 17 October 2003 all bank accounts of the eight entities were frozen. I was told that the plaintiff was advised that pending further arguments before me, the plaintiff was not obliged to serve on all parties concerned the orders I had made discharging the interim orders. The defendants applied to discharge the interim orders made. Tan, the third defendant, initially applied to vary and strike out various paragraphs of the interim orders. But seeing that both Lek and Lim, the first and second defendants, had successfully applied to discharge the interim orders made, Tan, the third defendant, amended his Summons in Chambers No 5747 of 2003 and sought the discharge of all the interim orders. That he would ask for the same reliefs from the injunctive and mandatory orders was only logical and proper. After all, the grounds for his application and both the factual and statutory background were the same as those affecting the first and second defendants.

10 In the result, all three defendants sought, firstly, the unconditional discharge of the ex parte interim injunction, as spelt out in para 1(i) to (vi) of the order of court. Secondly, they applied to set aside the mandatory injunction ordering them to procure the transfer to Amrae Benchuan of all the goods and assets of the eight entities named in the said order of court at no consideration. Thirdly, they applied to set aside the personal orders made against them to disclose all their assets. Fourthly, they applied for an enquiry into damages sustained by them and which ought to be paid by the plaintiff by reason of the wrongful issue of the injunctive orders. They finally sought indemnity costs against the plaintiff for wrongfully obtaining the injunctive and mandatory orders.

11 The grounds of the defendants’ application to set aside the draconian interim orders made were briefly as follows:

(a) The plaintiff had contravened Practice Direction No 2 of 1998 of the Supreme Court Practice Directions;

(b) The plaintiff had failed to make full and frank disclosure in obtaining the statutory interim injunctions, which were also in two respects mandatory;

(c) No real risk of dissipation of assets by the three defendants was shown;

(d) The plaintiff had obtained the injunctive and mandatory orders for the purpose of oppressing the defendants and had abused the process of the court in doing so; and

(e) The plaintiff had wrongfully obtained final relief in obtaining the injunctive orders.

12 On 17 October 2003 I heard the oral application of the first and second defendants to discharge the interim injunctions and the mandatory orders to disclose assets and to confirm the same by an affidavit. They had initially applied to the judge of the High Court who had made the said orders, but the applications were fixed before me for hearing. At the time of the hearing, the first and second defendants had filed their joint affidavit on 10 September 2003. Before I heard the applications to discharge the statutory injunctions and the other orders, the application by Summons in Chambers No 5707 of 2003 filed by Tan, the third defendant, was heard by Choo Han Teck J, who ordered that the earlier orders of the High Court made by another judge should be stayed pending further order “subject to the order preventing disposal of the assets”, which were allegedly still in the possession or control of one or more of the eight entities named earlier in this judgment.

13 In relation to the oral applications of the first and second defendants, which I heard on 17 October 2003, I made the following orders after full submissions were made. The application of Tan, the third defendant, which was essentially for variation, was heard later. By the time it was heard, I had announced my decisions in relation to the applications of the first and second defendants. As noted earlier, Tan, the third defendant, amended his application and sought a full discharge of the statutory injunctions and other orders made against him. All three parties asked for an order for enquiry as to damages on the ground that the application for the statutory injunction and the other orders were misconceived and damages ought to be paid.

14 At the conclusion of the hearing of the applications of the first and second defendants, I concluded that the allegations of the plaintiff that the defendants had conducted fraudulent trading, which was the main ground relied on by the plaintiff, required more particulars, although they did raise issues which required investigation at a trial after fuller particulars were filed. But much more had been disclosed after the plaintiff executed her judgment against Amrae Benchuan, which was inconsistent with fraudulent trading. As will be apparent later, when the entire picture was viewed in its perspective, I came to the conclusion that the statutory injunctions and the mandatory orders of disclosure of assets against the individual defendants, including the order that they affirm the list of their assets, were unjustified. The defendants’ grounds were...