Yap Jeffery Henry and Another v Ho Mun-Tuke Don

• Jurisdiction: Singapore
• Judge: Judith Prakash J
• Judgment Date: 15 June 2006
• Neutral Citation: [2006] SGHC 106
• Docket Number: Originating Summons No 1723 of
• Date: 15 June 2006
• Published date: 16 June 2006
• Year: 2006
• Plaintiff Counsel: Sankaran Karthikeyan and Ong Bock Kee (Toh Tan & Partners)
• Citation: [2006] SGHC 106
• Defendant Counsel: P Jeya Putra and Magdalene Chew (AsiaLegal LLC)
• Court: High Court (Singapore)
• Subject Matter: Liquidator of company subsequently applying to court for permission to resign as liquidator of company,Plaintiff-creditors of company applying to court to have defendant removed as liquidator of company,Liquidator,Circumstances under which creditors may apply to court for removal of liquidator,Whether due cause for removal of defendant as liquidator of company existing,Insolvency Law,Winding up,Section 302 Companies Act (Cap 50, 1994 Rev Ed),Whether liquidator having power to resign from office

15 June 2006 Judgment reserved.

Judith Prakash J:

Introduction

1 The plaintiffs in this originating summons, Jeffery Henry Yap (“Mr Yap”) and Azlan Bin Abdul Rahim (“Mr Azlan”), are two of the creditors of a company in liquidation, Timothy Seow Group Architects Pte Ltd (“the company”). The defendant, Don Ho Mun-Tuke (“Mr Ho”), was appointed as liquidator of the company in April 1999.

2 This application was filed on 10 November 2005. The main orders that the plaintiffs sought were for:

(a) Mr Ho to be removed as liquidator of the company;

(b) Mr Chen Yeow Sin and Mr Arumugam Ravinthran to be appointed liquidators of the company; and

(c) Mr Ho to forthwith hand over to the new liquidators an itemised list of all books, documents and records of the company which were in his possession, custody or control as the liquidator.

3 The first hearing of the application on 22 November 2005 was adjourned so that Mr Ho could file an affidavit responding to the allegations made by the plaintiffs. That affidavit was filed in early December 2005. The plaintiffs’ affidavit in reply having been filed on 16 December 2005, 20 January 2006 was assigned as the hearing date for the originating summons.

4 On 13 January 2006, Mr Ho took out his own application by way of Originating Summons No 77 of 2006 (“OS 77”). In OS 77, Mr Ho was named as the plaintiff and the company was named as the defendant. The main prayers in OS 77 were as follows:

(a) for an order that the specific requirements imposed by Rules 149 and 150 of the Companies (Winding Up) Rules (Cap 50, R 1, 2006 Rev Ed) be dispensed with;

(b) for an order that Mr Ho be permitted to forthwith resign from the office of liquidator of the company;

(c) that Mr Ho be released and that the company be dissolved; and

(d) that all fees, costs and expenses incurred by Mr Ho from the date of his appointment as liquidator on 13 April 1999 to the date of OS 77 be preserved as against the company and/or that the liquidator’s lien on the documents of the company be preserved.

At the request of Mr Ho’s solicitors, OS 77 was fixed for hearing on the same day as this originating summons.

5 When the two applications came on for hearing before me on 20 January 2006, counsel for the plaintiffs indicated that despite Mr Ho’s application for leave to resign, the plaintiffs wanted to proceed with their application. Even if Mr Ho was allowed to resign, the plaintiffs should be given the costs of their application as it had been made at the request of Mr Ho himself and the application to resign had been made at the last minute after the plaintiffs’ affidavit in reply had been filed and the plaintiffs had incurred substantial costs. Mr Ho was not willing to pay costs because he considered he had not done anything wrong.

6 I took the view that since the plaintiffs wanted Mr Ho to vacate the post of liquidator and to replace him with two other persons and since Mr Ho himself had now decided that he should leave, it would be best for me to allow him to do so immediately so that his responsibilities could be taken over quickly. I therefore proceeded to hear OS 77 first before dealing with this application. I then made the following orders in OS 77:

(a) that the specific requirements of rr 149 and 150 of the Companies (Winding Up) Rules be dispensed with;

(b) that Mr Ho be permitted to forthwith resign from the office of liquidator of the company known as Timothy Seow Group Architects Pte Ltd (in liquidation);

(c) that Mr Ho be forthwith released;

(d) that all reasonable fees, costs, and expenses incurred by the liquidator, Mr Ho, from the date of his appointment as liquidator, on 13 July 1999 [this date should actually have been 13 April 1999 but the order was made in terms of prayer 4 of OS 77 which contained the wrong date] to the date of this order be preserved as against the company, Timothy Seow Group Architects Pte Ltd (in liquidation) and that the plaintiff’s lien on all documents of the company, Timothy Seow Group Architects Pte Ltd (in liquidation) be preserved; and

(e) costs of OS 77 be reserved and parties to see me after judgment had been delivered in Originating Summons No 1723 of 2005.

I did not, however, make any order for the dissolution of the company since the creditors wanted to appoint new liquidators to continue with the liquidation.

Background facts

7 Most of the facts leading to the application by the plaintiffs are not in dispute.

8 The company carried on the business of providing architectural services to the building industry. It was incorporated on 20 January 1996 with an authorised capital of $1m divided into one million ordinary shares of $1 each. Mr Yap was employed by the company but his services were not paid for. He sued the company for the amounts due and, on 25 February 1999, the company consented to judgment being entered against it for the sum of $600,321, interest thereon of $19,605 and costs. On 26 February 1999, the directors of the company resolved to put the company into voluntary liquidation and appointed a provisional liquidator. On 13 April 1999, the creditors of the company confirmed the winding up and appointed Mr Ho the liquidator of the company.

9 Mr Ho was asked by the creditors to carry out investigations into the affairs of the company. He did so. On 15 May 2000, he issued a report containing the findings he had made after an examination of the company’s records. One of his findings was that the company had acquired the business and net assets of a partnership but that certain parts of that business had still continued under the name of the partnership (instead of under the name of the company) and the partnership had benefited from such business. Proceeds from projects acquired by the company had been deposited into the bank account of the partnership. He also stated that the company became insolvent sometime in 1997 but that the directors, although fully aware of the poor state of the company’s finances, had continued to operate and caused the company’s financial position to deteriorate even further. He made an observation that certain directors had repeatedly drawn money from the company as repayments to themselves. He expressed concern as to whether the directors had acted with due diligence in the discharge of their duties and also observed that the company might have a claim against the directors and shareholders for a sum of more than $1.3m. Mr Ho stated that in his view, based on the records of the company and the explanations given by the directors, it appeared that funds put into the partnership account had been utilised for the purposes of the company’s project and expenses and therefore that the directors had properly accounted for a sum of $3.6m that had gone into the partnership account.

10 After the report was issued, Mr Ho informed the Committee of Inspection (“COI”) of the company (of which Mr Yap was a member) that he had referred the matters set out in the report to his solicitors for an opinion on the company’s rights against the directors. At the same time, he was also assisting the Commercial Affairs Department of the Singapore Police Force (“CAD”) with investigations into this matter. In December 2001, Mr Ho told the COI that the CAD would not be taking any action and enquired whether the members of the COI wished to pursue a civil action for recovery. The plaintiffs then asked Mr Ho for the opinions of himself and his solicitors on the merits of such an action. Mr Ho responded that he was waiting for his solicitors’ opinion. Mr Ho sent his solicitors numerous reminders but did not receive their opinion until May 2002. In the meantime, Mr Ho continued with his other work in relation to the liquidation of the company.

11 On 10 May 2002, Mr Ho convened the 6th meeting of the COI with a view to finalising the liquidation. Mr Yap was a member of the COI. He did not attend the meeting but was represented by his solicitor who had a proxy from him. Two of the former directors of the company who were also members of the COI were present at the meeting as well.

12 Mr Ho informed the meeting that on 9 May 2002, he had received his solicitors’ opinion on the merits of an action against the directors of the company. He then stated that if he was to proceed with such an action, substantial costs would be involved. At that time, the assets of the company were insufficient to fund any recovery action. Accordingly, he could not proceed further unless the action was funded by the creditors. If no funds were forthcoming, then the liquidation would end and final meetings of the members/shareholders and creditors would be called to close the liquidation. He stated that the creditors would need to decide whether they would consent to the finalisation of the liquidation. Alternatively, if they wished to continue with the liquidation, they could either finance the liquidation process or appoint a new liquidator to take Mr Ho’s place. Mr Yap’s counsel stated that he needed time to take instructions from his client and for him to decide whether to fund the recovery action. Mr Ho then suggested that notices for the convening of the final meeting be sent out so that it could be convened at least six weeks later thus giving counsel time to take his client’s instructions.

13 The final meeting of the creditors was fixed on 2 July 2002. At that meeting, Mr Ho proposed that the company be dissolved and its books and records be destroyed within three months. A vote was taken and this proposal was approved despite the plaintiffs’ objections. The plaintiffs objected to the proposal because it would result in evidence being destroyed. Mr Yap then took out an originating summons to prevent the implementation of the resolutions. By orders of court made on 2 October 2002 and 13 November 2002, the dissolution of the company was deferred and Mr Yap was allowed access to the company’s books and records. Thereafter, the plaintiffs inspected the...