Wong Ser Wan v Ng Bok Eng Holdings Pte Ltd and Another

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 19 August 2004
• Neutral Citation: [2004] SGHC 181
• Date: 19 August 2004
• Subject Matter: Transferor transferring property to defendants purportedly as return of gift,Whether plaintiff a creditor,Transferor intending to defraud plaintiff,Land,Transferor controlling mind of defendants,Whether defendants acquired property for valuable or good consideration and in good faith,Consideration for property transferred to defendants fixed arbitrarily,Conveyance,Section 73B Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed),Defences available to defendant,Transferor intending to reduce plaintiff's share of matrimonial assets upon divorce by transfer of property,Whether plaintiff prejudiced by conveyance of property,Whether defendants had notice of transferor's intention to defraud plaintiff,Transferor failing to honour financial agreement with plaintiff,Whether amounting to conveyance of property,Elements to be established by plaintiff to found cause of action,Whether conveyance made with intention of defrauding creditors
• Docket Number: Suit No 310 of 2003
• Published date: 10 September 2004
• Defendant Counsel: Leslie Chew SC, Chan Kia Pheng and Shaun Koh (Khattar Wong and Partners)
• Court: High Court (Singapore)
• Plaintiff Counsel: K Shanmugam SC, Ang Cheng Hock and Leona Yuen (Allen and Gledhill)

19 August 2004 Judgment reserved.

Judith Prakash J:

Introduction

1 The title of this action is somewhat misleading. This case is just one facet of a long-running and on-going matrimonial dispute between the plaintiff, Mdm Wong Ser Wan (“Mdm Wong”), and her ex-husband, Mr Ng Cheong Ling (“Mr Ng”). It is Mdm Wong’s attempt to annul the sale and transfer by Mr Ng of certain assets so that these assets may be considered for division between her and Mr Ng when the ancillary matters attendant on the divorce proceedings are heard.

2 On 27 June 1998, Mr Ng transferred the land and premises located at 764 Mountbatten Road, Singapore (“the Mountbatten property”) to the first defendant, Ng Bok Eng Holdings Pte Ltd (“NBEH”) for a consideration of US$2m (then equivalent to $3,535,972). NBEH is a private limited company that was founded by Mr Ng’s father, Mr Ng Bok Beng (“BB Ng”). Its shareholders are Mr Ng’s parents and siblings. The directors of the company were BB Ng, Mr Ng himself and his older brother, Ng Cheong Bian (“CB Ng”).

3 Mr Ng is no longer a shareholder in NBEH although he held varying numbers of shares in it for nearly 30 years because, on 26 September 1998, he transferred his then entire shareholding of 60,000 shares (“the NBEH shares”) to the second defendant, Bian Bee Company Pte Ltd (“BBC”), for a consideration of US$1m (then equivalent to $1,760,000). At that time, the shareholders in BBC were BB Ng (18%) and his elder son, CB Ng (82%). They were also the directors of the company. Thus, at all material times, both NBEH and BBC were owned and controlled by the Ng family.

Cause of action

4 Mdm Wong’s claim in the suit for the transfers of both the Mountbatten property and the NBEH shares to be declared voidable, is based on s 73B of the Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) (“the Act”). As explained in Quah Kay Tee v Ong & Co Pte Ltd [1997] 1 SLR 390, the wording of this section is derived from s 172 of the English Law of Property Act 1925 (“the 1925 Act”). Section 172 was itself re-enacted from para 31 of Pt II of Schedule 3 to the Law of Property (Amendment) Act 1924 which was a re‑formulation, in a rather summarised form, of the provisions of ss 2 and 6 of the Statute of 13 Eliz 1571 (c 5) intituled An Act Against Fraudulent Deeds, Gifts, Alienations, Etc (“the Elizabethan Statute”) a piece of legislation that was intended to protect creditors against action taken by debtors to salt away their assets. The Elizabethan Statute applied in Singapore until November 1993 when the governing legislation in such situations became s 73B of the Act.

5 Section 73B states:

(1) Except as provided in this section, every conveyance of property, made whether before or after 12th November 1993, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section does not affect the law relating to bankruptcy for the time being in force.

(3) This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors.

Thus, the section confers a cause of action on a person who is able to establish the following matters:

(a) That there has been a conveyance of property.

(b) That this conveyance was made with the intent of defrauding creditors.

(c) That he is a person who was prejudiced by the foregoing conveyance of property.

The plaintiff has the burden of proof in respect of the aforesaid matters. However, the defendant, who is generally the recipient of the property conveyed, will be able to defeat the plaintiff’s action and retain the property if he can establish:

(a) That he acquired the property for valuable consideration and in good faith or for good consideration and in good faith; and

(b) he did not have notice of the debtor’s intent to defraud his creditors.

6 There has been discussion in case law of what is meant by the phrase “intent to defraud creditors” in s 73B(1). Lloyds Bank Ltd v Marcan [1973] 2 All ER 359 (Ch D) and subsequently [1973] 3 All ER 754 (Court of Appeal), was a case involving s 172(1) of the 1925 Act. Pennycuick V-C, who heard the case at first instance, held that the word “defraud” in the expression “with intent to defraud” in that section was designed to reproduce the expression “hinder, delay or defraud” in the Elizabethan statute and was not intended to be confined to cases of fraud in the ordinary modern sense of that word, ie, as involving actual deceit or dishonesty. The word “defraud” in this context carried the meaning of depriving creditors of timely recourse to property that would otherwise be applicable for their benefit. In the Court of Appeal, Russell LJ agreed (supra at 759) that an intent to deprive a creditor of timely recourse to the property concerned by granting a lease of it so that the mortgagee bank would not be able to obtain vacant possession “was, in the context of the relationship of debtor and creditor, less than honest: it was sharp practice, and not the less so because he was advised that he had power to grant the lease”. Cairns LJ, however, disagreed with Pennycuick V-C that the word “defraud” was not intended to confine the application of the section to cases involving actual deceit or dishonesty. In his view, whilst deceit was not a necessary element, dishonest intention was, at any rate, when the conveyance was for consideration (at 760). The upshot of the Court of Appeal judgment is that the plaintiff must establish some degree of dishonesty on the part of the transferor in order to succeed.

7 The Quah Kay Tee case stands for the principle that where a transfer has been made without any or with nominal consideration, it is only necessary to show that the transferor had an intent to defraud creditors. It is not relevant what the intention of the transferee was since such a donee would not fall within the exception of a bona fide purchaser for value without notice. In such a situation, the intent of the transferor can be inferred from the circumstances surrounding the transfer (see per Lai Kew Chai J at [23]):

The mere fact of a man, thus indebted [ie deeply indebted], giving part of his estate is, by presumption and construction of law, a fraudulent act.

8 Where, however, the transfer was made for valuable consideration, to set it aside it must be shown that the transferor acted with the actual intent to defraud creditors and that the transferee had notice of the transferor’s fraudulent intention. The intent of the transferor will not be inferred simply from his disposal of the asset concerned since he is disposing of it for value.

9 With those principles in mind, I turn to consider the facts of this case in more detail.

The parties and the marriage

10 Mdm Wong and Mr Ng were married in January 1976. They subsequently had three children. In the 1990s, marital relations became strained. In December 1995, Mdm Wong filed a maintenance summons against her husband for maintenance for herself and the children. This summons was withdrawn in March 1996 after Mr Ng promised to give her a monthly allowance of $12,000. Asserting this promise had not been kept, Mdm Wong filed a further maintenance summons in July 1996. This summons was heard in August 1996 and a consent order providing for monthly maintenance of $15,000 was entered. In October 1996, Mdm Wong filed a petition for divorce on the ground of her husband’s alleged adultery. Mr Ng then filed a cross-petition on the ground of unreasonable behaviour.

11 In 1997, there was a great deal of correspondence between the parties’ respective solicitors which was initiated by a letter from Mr Ng’s solicitors stating that their client desired to save the marriage and to reach a settlement, and wanted legal matters to be put on hold. In July 1997, the respective solicitors negotiated the terms of a financial agreement and the parties finally signed this on 1 December 1997. The agreement provided, inter alia, for Mr Ng to give certain immovable properties to Mdm Wong; to pay her a sum of $2.5m and a sum of US$320,000; to continue to pay her monthly maintenance in accordance with the consent order of court; and to transfer certain shares to her name. He was also to withdraw his answer to petition and cross-petition and pay Mdm Wong’s legal costs. Mdm Wong agreed to withdraw her divorce petition.

12 The financial agreement provided for the shares to be transferred to Mdm Wong by 15 February 1998. This was not done. In March 1998, a payment that fell due under the financial agreement was not made but, a few weeks later, Mr Ng gave Mdm Wong certain other shares in lieu of such payment. In June 1998, Mdm Wong complained that Mr Ng had only paid her $5,000 as maintenance instead of the full amount of $15,000.

13 On 12 June 1998, unbeknownst to Mdm Wong, Mr Ng entered into an agreement to sell the Mountbatten property to NBEH for US$2m. Later that month, on 25 June to be exact, he entered into an agreement to sell the NBEH shares to BBC for US$1m. The transfer of the Mountbatten property took place on 27 June 1998 and the transfer of the NBEH shares to BBC took place on 26 September 1998.

14 According to the financial agreement, Mr Ng had to place $1m out of the $2.5m in Mdm Wong’s bank account not later than 30 November 1998. He did not meet this obligation.

15 On 8 July 1999, following negotiations conducted through their solicitors, the parties signed a deed of separation that, among other things, affirmed Mr Ng’s obligations under the financial agreement. The next day, Mdm Wong withdrew her divorce petition.

16 Unfortunately, the parties’ relationship did not improve thereafter. Mdm Wong suspected Mr Ng of carrying on another affair and therefore recorded some of his telephone conversations. After listening to these conversations, she believed...