Tohru Motobayashi v Official Receiver and Another

• Judge: Chao Hick Tin JA
• Judgment Date: 31 October 2000
• Neutral Citation: [2000] SGCA 59
• Defendant Counsel: Sarjit Singh and Sunari bin Kateni (OAPT),Leo Cheng Suan and Goh Wei Ling (Chu Chan Gan & Ooi)
• Year: 2000
• Subject Matter: Privity of interest,Originating processes,Effect of "no order",Whether privity of interest between foreign liquidator and Singapore liquidator,Civil Procedure,Abuse of process,Identity of parties,Whether Rules of Court apply where Company (Winding-up) Rules silent,Cause of action estoppel,Foreign company registered in Singapore,Whether appeal lies when "no order" made on an application for directions,Whether all Singapore creditors to be paid before remitting net amount to foreign liquidator,Appeals,Whether foreign liquidator could apply to be joined under O 15 r 6,Companies,O 1 r 2(4) Rules of Court,Winding up,Rules of court,s 377(3)(c) Companies Act (Cap 50, 1994 Ed),Whether abuse of process,Foreign liquidator failing to intervene in previous proceedings and filing fresh originating summons in own name,Estoppel
• Published date: 19 September 2003
• Plaintiff Counsel: Michael Hwang SC, Daren Shiau and Desmond Ho (Allen & Gledhill)
• Citation: [2000] SGCA 59
• Court: Court of Three Judges (Singapore)

(delivering the judgment of the court): This appeal raises an important issue of construction of s 377(3)(c) of the Companies Act (Cap 50, 1994 Ed). The facts that give rise to this appeal are briefly these.

The facts

Okura & Co, Ltd (`Okura Japan`), a company incorporated in Japan and based in Tokyo, carried on the business of trading in machinery, steel and other commodities. It was adjudicated bankrupt by the Tokyo District Court on 21 August 1998. It owed huge amounts of debt totalling approximately [yen ]252.8b to some 2,565 creditors. The appellant, Tohru Motobayashi, an attorney-at-law in Japan, was appointed the Trustee in Bankruptcy of Okura Japan.

Okura Japan is registered as a foreign company with the Registry of Companies in Singapore under the Companies Act, and has been so registered since 1973. Prior to its bankruptcy, it had been carrying on business at its branch in Singapore. For convenient reference, we shall refer to the branch of Okura Japan in Singapore as `Okura Singapore`. On 3 November 1998, Okura Japan filed a winding up petition in respect of Okura Singapore and a winding up order was made on 4 December 1998. The second respondent, Mr Ong Sin Huat of Ong Yong & Partners, was appointed the liquidator of Okura Singapore (`Singapore liquidator`).

The first creditors` meeting of Okura Singapore was held on 22 February 1999. The meeting was informed that Okura Singapore owed Okura Japan a total sum of S$9m and that Okura Japan owed Okura Singapore a total of S$8m. The meeting was also informed that the appellant was prepared to allow the Singapore liquidator to distribute to creditors of Okura Singapore the net assets realised and received by the Singapore liquidator, if the Singapore liquidator treated Okura Japan as a net creditor of about S$1m. Okura Japan was also prepared to allow the creditors of Okura Singapore to recover and realise the foreign assets of Okura Japan which appeared in Okura Singapore`s books. The possible implications of s 377(3) of the Companies Act on such a proposal were noted, and the meeting gave in principle agreement to the appellant`s proposal, subject to the approval of the Singapore court and the working out of the details.

Subsequently, the appellant wrote a letter dated 6 May 1999 to the Singapore liquidator. The relevant part of the letter said:

2 As you are aware, Bank of Tokyo Mitsubishi, The Asahi Bank Ltd, Dai-Ichi Kangyo Bank Ltd, The Sakura Bank Ltd and The Fuji Bank Ltd are substantial creditors of Okura (Singapore), comprising more than 80% of the total debts of Okura (Singapore).

3 Some of these creditors, including Bank of Tokyo Mitsubishi, The Asahi Bank Ltd and The Fuji Bank Ltd, have filed Proofs of Debt with Okura (Singapore) and Okura (Japan), while some creditors have filed Proofs of Debt with Okura (Japan) only.

4 We anticipate a problem with such filings of identical proofs in multiple jurisdiction, because:

(a) the extent of such practice is unclear.

(b) distribution in one jurisdiction may be at the expense of creditors of other jurisdiction.

...

7 Having carefully considered all the above mentioned factors, we would request that you make an application to the Singapore court for the following clarifications and order:

(a) that you, as the liquidator of Okura (Singapore), a branch office of Okura (Japan), with no separate legal entity, do remit all the assets recovered and realised for Okura (Singapore), (after paying off the priority creditors and payments stipulated by the Singapore law, including liquidator fees on a time based basis) to the Trustee in Bankruptcy of Okura (Japan) for global distribution, so that we would be able to make distribution to all creditors, including creditors of Okura (Singapore) in accordance with Japanese law, provided that proof of claim should be filed to the Tokyo District Court by those Singapore creditors as soon as possible but no later than 21 May 1999.

(b) that we, as Trustee in Bankruptcy of Okura (Singapore) will pursue all the foreign debtors of Okura (Singapore) as some of these foreign debtors are also debtors of Okura (Japan) and other Okura branch offices.

On 31 May 1999, the Singapore liquidator applied to the High Court by way of Summons-in-Chambers 3525/99 (`SIC 3525/99`) seeking the following declarations:

(a) that the liquidator do remit all the assets recovered and realised for Okura & Co Ltd (Singapore branch), (after paying off the priority creditors and payments as set out under s 328 of the Companies Act (Cap 50, 1994 Ed) including liquidator fees on a time based basis) to the Trustee in Bankruptcy of Okura & Co (Japan) for global distribution to all the creditors of Okura & Co Ltd in accordance with the Law of Japan, and

(b) that the liquidator may allow the Trustee in Bankruptcy of Okura & Co (Japan) to pursue all the remaining foreign debtors of Okura & Co Ltd (Singapore branch).

The application was heard on 29 July 1999 before Lim Teong Qwee JC. On prayer (b), the learned judicial commissioner made an order that the Singapore liquidator allow the appellant `to pursue all of the foreign debts, other than in respect of assets of the Company in Singapore`. He made no order in respect of prayer (a). The Singapore liquidator indicated that he understood the order to mean that he was to distribute to the Singapore creditors first, with any surplus to be sent to Japan for distribution.

The Singapore liquidator was requested by the appellant to appeal against the decision of the learned judicial commissioner. However, the Singapore liquidator declined to do so on the ground of the costs involved. The appellant then commenced proceedings in OS 210/2000 (`OS 210/2000`) on 11 February 2000 seeking the following declarations:

1 That, on its true construction, the effect of s 377(3)(c) of the Companies Act is that a liquidator of a foreign company appointed for Singapore by the court is required to pay the net amount of all sums recovered and realised in Singapore to the liquidator in the country where the foreign company was formed or incorporated after making payment of all preferred debts as defined in s 328 of the Companies Act.

2 That Mr Ong Sin Huat (the liquidator appointed by the Singapore High Court as the Singapore liquidator of Okura & Co Ltd) is required to pay the net amount of all sums recovered and realised in Singapore to the plaintiff (the Japanese liquidator of Okura & Co Ltd) after making payment of all preferred debts as defined in s 328 of the Companies Act.

Decision of the learned judge

The application was heard before Kan Ting Chiu J. The learned judge was of the opinion that when the Singapore liquidator decided not to appeal against the decision of Lim Teong Qwee JC, the appellant should have intervened by applying to be added as a party to the proceedings under O 15 r 6(2)(b)(ii) of the Rules of Court, and then appealed against the decision in his own name. Instead, he had delayed taking any action for more than half a year, and now initiated proceedings in OS 210/2000. In these circumstances, the learned judge held that the application was an abuse of the process of the court, and dismissed the application without considering the merits. The learned judge further held that the appellant was barred from starting fresh proceedings by reason of the cause of action estoppel. [See [2000] 4 SLR 265.]

The appeal

Against the learned judge`s decision the appellant appeals. The appeal raises mainly three issues: first, whether the appellant`s application in OS 210/2000 initiated by the appellant was an abuse of process; second, whether the appellant was barred from making the application by reason of cause of action estoppel; and third, what the proper construction of s 377(3)(c) of the Companies Act should be.

Abuse of process

In his grounds of judgment, the learned judge recounted the events that led him to the conclusion that the application before him was an abuse of process. He found that the appellant was the `moving force` behind the Singapore liquidator`s application in SIC 3525/99 from the start; that he instructed the Singapore liquidator to make the application that was made; and that thereafter he was kept informed of the progress of the application by counsel. When the application failed, he was informed by the Singapore liquidator accordingly and was also informed that the latter would not appeal. The appellant could in those circumstances have applied to be joined in the proceedings under O 15 r 6(2)(b)(ii) of the Rules of Court, but he did not do so. Instead, the appellant took no action for more than half a year before filing the application in the present proceedings. The learned judge held that in the absence of the Companies (Winding-Up) Rules dealing with the point of joinder, the Rules of Court would apply. He said at [para ] 26 of his grounds of judgment:

Order 1 r 2(4) should be read to mean that where there are winding-up rules touching on any aspect of winding-up proceedings, the Rules of Court do not apply. But where the winding-up rules are silent, the Rules of Court apply, eg as the winding-up rules do not refer to amendments of petitions and orders, the Rules of Court apply to them. Likewise, as the winding-up rules contain no provisions for the addition of parties, O 15 applies to joinder applications. If this were not the case, it would mean that no parties can be added in winding-up proceedings, or that such joinders are not regulated.

Later, the learned judge came to the following conclusion at [para ] 29 and 30:

29 I was not persuaded by the reasons put forward to justify the failure to intervene. The trustee should have intervened when he learnt of the liquidator`s decision not to appeal, and appealed in his own name.

30 Instead, he did nothing for more than half a year, then took out the fresh proceedings. This was an abuse...