Category: Law

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Case Update: Simgood Pte Ltd v MLC Shipbuilding Sdn Bhd [2015] SGHC 303

  1. The plaintiff succeeded inter alia in a claim in detinue.
  2. A claim in detinue lies at the suit of a person who has a right to immediate possession of goods against a person who is in possession of the goods and who, upon proper demand and without lawful excuse, fails or refuses to deliver them up.: [159].
  3. There are important distinctions between a cause of action in conversion and a cause of action in detinue. The former is a single wrongful act and the cause of action accrues at the date of the conversion; the latter is a continuing cause of action which accrues at the date of the wrongful refusal to deliver up the goods and continues until delivery up of the goods or judgment in the action for detinue. Demand for delivery up of the chattel was an essential requirement of an action in detinue, and detinue lay only when at the time of the demand for delivery up of the chattel made by the person entitled to possession the defendant was either in actual possession of it or was estopped from denying that he was still in possession: [159], [161].
  4. A proper demand is crucial to ground an action in detinue because it puts the person in possession of the goods clearly on notice that he should no longer retain the goods but instead deliver them up to the person entitled to possession of them. Two justifications are provided for this requirement. First, the requirement of a demand ensures fairness to the person in possession of the goods by giving him reasonable notice that he is to put the goods in a state of readiness for delivery. Second, the requirement of a demand fixes a clear and fair point in time at which the cause of action in detinue arises: [163].
  5. Judgment in a successful action in detinue may take a number of forms. One of those is a judgment for the return of the chattel or recovery of its value as assessed together with damages for wrongful retention: [168].

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Case Update: The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal

The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] 2 SLR 213; [2012] SGCA 9 – classification of creditors in scheme of arrangement and principles on implementation of Schemes of Arrangement

 

  1. The Court of Appeal in this case laid down several principles on how schemes of arrangement are to be implemented.[1] Preliminarily, issues of creditors’ classification should be considered by a court when it first hears the application for creditors’ meetings.

 

  • (a) A proposed scheme manager must act transparently and objectively and should not be in a position of conflict of interest (ie, if he aligns his interests without good reason with those of the company) (at [71]-[73]). In this case, the proposed scheme manager was conflicted because he was also the nominee for the individual voluntary arrangements filed by the chairman and an executive director (who was also the chairman’s wife) of the respondent (at [74]-[78]).

 

  • (b) Scheme creditors are entitled to examine the proofs of debt submitted by other scheme creditors in respect of a proposed scheme (at [79]-[93]).

 

  • (c) A scheme creditor should be notified of the proposed scheme manager’s decisions to admit or reject its own and other creditors’ proofs of debt before the votes are cast at the creditors’ meeting. In this case, the proposed scheme manager should have completed adjudicating all the proofs of debt submitted (and notified all scheme creditors of the admitted proofs) prior to the Scheme Meeting (at [94]-[99]).

 

  • (d) A scheme creditor may appeal the proposed scheme manager’s decisions to admit or reject its own and other creditors’ proofs of debt for the purposes of voting. In this case, some of those decisions to admit or reject certain proofs of debt were held to be incorrect (at [100]-[110]).

 

  • (e) Scheme creditors should be classified differently for voting purposes when their rights are so dissimilar to each other’s that they cannot sensibly consult together with a view to their common interest. In other words, if a creditor’s position will improve or decline to such a different extent vis-à-vis other creditors simply because of the terms of the scheme assessed against the most likely scenario in the absence of scheme approval, then it should be classified differently. In this case, while the contingent creditors’ claims need not have been classified separately, the claims of certain substantial shareholders should have been classified separately. This was because the substantial shareholders’ claims would have been subordinated in a liquidation pursuant to s 250(1)(g) of the Act, but they would not have been subordinated under the Scheme (at [130]-[151]).

 

  • (f) Related party creditors and contingent creditors should generally have their votes discounted; while wholly owned subsidiaries should have their votes discounted to zero and should effectively be classified separately from the general class of unsecured creditors (at [152]-[175]).

[1] See Supreme Court Note: The Royal Bank of Scotland NV v TT International Ltd 2012] SGCA 9 (principles governing implementation of schemes of arrangement), Supreme Court Note, Supreme Court, Mar 2012 (1).

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Case Update: Long Say Ting Daniel v Merukh Nunik Elizabeth

Long Say Ting Daniel v Merukh Nunik Elizabeth (personal representative of the estate of Merukh Jusuf, deceased) (Motor-Way Credit Pte Ltd, intervener) [2013] 1 SLR 1428; [2012] SGHC 250. Section 391 of the Companies Act does not apply to proceedings commenced by persons other than the company.

  1. The High Court in this case interpreted section 391 of the Companies Act, which sets out the Court’s power to grant relief from liability where, among others, a director believes that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust.
  2. Section 391 applies to officers of a company, persons employed by a company as auditors, experts within the meaning of the Companies Act, and persons who are receivers, receivers and managers or liquidators (section 391(3) of the Companies Act)]
  3. The Court had to determine whether section 391 of the Act only applies to proceedings commenced by the company, and not by any other persons. The Court held in the affirmative, i.e. that section 391 of the Act does not apply to proceedings commenced by persons other than the company (at [56]).
  4. Background: the estate of the plaintiff’s deceased co-director threatened to take legal action against the plaintiff (either by the Company or qua the estate as a third party) for breach of director duties in selling several properties belonging to the company.
  5. The Court held (at [66], [68]) on the facts that the plaintiff was entitled to relief under section 391 against proceedings by the Company only as he had not been deceitful or unreasonable. However, this was not applicable to potential proceedings by third parties.
  6. Significance: this decision makes clear that relief under section 391 of the Companies Act is a narrow one and does not protect the applicant from proceedings by third parties. It is however unclear what effect a judgment granting relief under section 391 would have on proceedings commenced by third parties. It is likely that a favourable judgment would at the very least dissuade third parties from commencing proceedings since the court would already have deemed the applicant to have been acting honestly and reasonably.
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Case Update: Ang Thiam Swee v Low Hian Chor [2013] SGCA 11

Ang Thiam Swee v Low Hian Chor [2013] SGCA 11 – commencement of statutory derivative action – good faith requirement.[1]

 

The Court of Appeal clarified and articulated several principles on the good faith requirement (under section 216A(3)(b) of the Companies Act) in respect of commencing statutory derivative actions under section 216A of the Companies Act.

 

The Court of Appeal clarified that while the motivations of the applicant should be assessed, it is not the motivations per se that constitute bad faith; instead, bad faith will only be established where the applicant’s motivations amounted to a personal purpose (where the applicant’s judgment becomes “clouded by purely personal considerations”) which indicated that the company’s interest would not be served: at [12]-[17].

 

There is no presumption that every party with a reasonable and legitimate claim was acting in good faith. Instead, the onus was upon the applicant to demonstrate that he was or may be genuinely aggrieved. (At [18]-[23]). (This overturned existing Singapore case law which stated that there was a presumption.)

 

Drawing from Canadian and Australian jurisprudence, the Court of Appeal applied a test for good faith which looked at (at [24]-[31]):

  • whether the applicant had an honest belief in the merits of the proposed derivative action; and
  • whether the applicant’s collateral purpose is sufficiently consistent with the purpose of doing justice to a company such that he is not abusing the statute, amounting to abuse of process, or abusing the company as a vehicle for his own personal interests.

 

Further, considerations of legal merit should not be factored into the assessment of good faith and may more appropriately be dealt with under s 216A(3)(c), which looked to the prima facie interests of the company (at [58]).

[1] See also Supreme Court Note- Ang Thiam Swee v Low Hian Chor [2013] SGCA 11 (s 216A of the Companies Act) Supreme Court Note, Supreme Court, Mar 2013 (1).

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Work Injury Compensation Act compensation limits increase Jan 2016

Singapore Law; Legal; Lawyer

Work Injury Compensation Act (WICA) compensation limits 

The Ministry of Manpower (MOM) recently announced on 5 October 2015[1] that from 1 January 2016, the maximum and minimum WICA compensation limits for death, permanent incapacity and medical expenses will be increased as follows:

Existing Limit New Limit
Death Minimum $57,000 $69,000
  Maximum $170,000 $204,000
Permanent incapacity Minimum $73,000 $88,000
  Maximum $218,000 $262,000
Medical expenses Up to $30,000 or 1 year from date of injury, whichever reached earlier Up to $36,000 or 1 year from date of injury, whichever reached earlier

Additionally, treatments that facilitate early return to work will be claimable as part of WICA medical expenses. This would cover charges for physiotherapy and occupational and speech therapy, case management, psychotherapy, functional capacity evaluation and worksite assessment for purposes of rehabilitating an injured employee back to work, and the cost of medicines and artificial limbs and surgical appliances.

[1] See Work Injury Compensation Act (Amendment of Third Schedule) Order 2015; Third Schedule of the Work Injury Compensation Act.

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Case Update: SAAG Oilfield Engineering (S) Pte Ltd v Shaik Abu Bakar bin Abdul Sukol and another and another appeal [2012] 2 SLR 189 – contingent creditors under scheme of arrangement

SAAG Oilfield Engineering (S) Pte Ltd (formerly known as Derrick Services Singapore Pte Ltd) v Shaik Abu Bakar bin Abdul Sukol and another and another appeal [2012] 2 SLR 189; [2012] SGCA 7 – whether workmen who have tortious claims against a company (contingent creditors) are creditors under a scheme of arrangement.

Two workmen suffered injuries in industrial accidents in the course of their employment under a company (Derrick Services), which was later bought over by SAAG, and initially lodged claims under the then Workmen’s Compensation Act (“WCA”). The company was subject to a Scheme of Arrangement. The two workmen did not attend the creditors’ meeting and did not submit any proof of debt to the Scheme administrators. After the Scheme had terminated, the workmen withdrew their WCA claims and commenced common law tort actions against SAAG. SAAG applied to the High Court to determine whether these tort actions had been extinguished by the implementation of the Scheme.

The High Court held that the workers’ tortious claims were not extinguished by the Scheme as they did not participate in the Scheme and their claims were covered by insurance policy which the former company, Derrick Services, and SAAG had in respect of the workmen’s claims. SAAG appealed, so their tortious liability would be effectively borne by the insurer.

The Court of Appeal allowed the appeal and held that the workmen (who were contingent creditors) were deemed creditors for the purposes of section 210 of the Companies Act and specifically for the purposes of the Scheme.

The fact that the workmen’s claims were covered by insurance (or guarantee or indemnity) made no difference to the analysis of whether the workmen were creditors (at [47]).

The Court thought that it would render section 210 (which provides for Schemes of Arrangement) pointless if tort claimants, who may form a substantial class of a company’s creditors, are excluded from a Scheme (at [48]).

Where claims against a company have not been agreed, it is usual to allow creditors to vote for the amounts for which they estimate that the company is liable to them, subject to reasonableness. Where there is serious doubt over the existence and/or size of a tort claimant’s unliquidated claim, and if such a claim is critical to determining whether there is the requisite majority for the Scheme to be executed, then the creditors’ meeting should be adjourned and the matter be decided by the courts: at [49].

The Court followed the English decision of Re Midland Coal, Coke, and Iron Co, Re [1895] 1 Ch 267 and held that creditors include contingent creditors whose claims could be admitted to proof in a winding up, even if it was for an unproven, unliquidated amount (at [33], [50]).

The Court then held that the workmen were Scheme Creditors under the definition of the Scheme (based on contractual interpretation) because SAAG was liable to them, notwithstanding that they were indemnified against that liability by virtue of the insurance policy (at [57]).

It was not open for a creditor (who was intended to be bound by the Scheme) to argue that he was not bound because he did not consent to or participate in the Scheme and thus did not receive any payouts, because a Scheme was a statutory contract and was not subject to common law requirements of contractual formation, e.g. need for consideration etc: at [61]-[62].

The workmen were therefore bound by the terms of the Scheme and therefore precluded from maintaining their common law claims against SAAG: at [63].

There would be no injustice in this case because the workmen still had recourse to their WCA claims as the WCA claims were under the terms of the Scheme: at [65]-[66].

However, this was merely fortuitous. In future cases, tort claimants who were not aware of and/or did not participate in a Scheme could find their claims entirely barred without their knowledge: at [67].

Thus, the Court stated several guidelines adopted from the Australian decision of R L Child & Co Pty Ltd (1986) 10 ACLR 673 so that such a wide interpretation of ‘creditors’ taken would not cause injustice (at [68]):

A responsible officer of the company proposing the scheme should provide evidence that the company has received no notice of any pecuniary claim against it and it is not aware of any circumstances likely to give rise to a pecuniary claim against the company other than what was disclosed to the court.

The courts should be slow to approve a scheme which would have the effect of barring a potential claim with no effective notice of the scheme given to the potential claimant and where this can be avoided without frustrating the commercial purpose of the scheme.

It would be appropriate to qualify the definition of a creditor in a scheme of arrangement to exclude any person having a claim in respect of which the company is entitled to indemnity under a policy of insurance, to the extent of the amount recoverable under such policy in respect of such claim.

Significance: entities who act as Scheme Managers should advise the company in respect of the above guidelines laid down by the SGCA in relation to contingent creditors vis-a-vis a Scheme.

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Case Update: The Royal Bank of Scotland NV v TT International Ltd [2012] 4 SLR 1182; [2012] SGCA 53 – disclosure of professional fee arrangements to scheme creditors and the court

The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] 4 SLR 1182; [2012] SGCA 53 – disclosure of professional fee arrangements to scheme creditors and the court

Significance: entities who act as Scheme Managers should take note of the duties and principles involved in implementing a Scheme as laid down by the SGCA in both judgments of RBS v TT International; the breach of duties may result in the Scheme being set aside and costs of the Scheme manager being forfeited.

  1. The company entered into an agreement with an entity owned by the scheme manager of the Scheme of Arrangement where the company was to pay the entity a success-based fee for professional services rendered upon successful implementation of the Scheme. However, this agreement was not disclosed to the scheme creditors and to the Court prior to the sanction of the Scheme.
  1. The Court of Appeal in this decision held that the agreement should have been disclosed so that scheme creditors could make an informed decision on whether to support the Scheme given the potentially large amount involved that could affect their financial interests: at [23].
  1. The Court held that a company to be subject to a Scheme had an obligation to disclose all material information to the scheme creditors, including contingent liabilities, and not use the device of ‘excluded creditors’ in a Scheme to keep actual or contingent liabilities hidden from other creditors: at [20]-[23].
  1. The Scheme Manager likewise had an obligation to act in good faith to the scheme creditors and not mislead or suppress material information from them. He also has an obligation to not place himself in conflict of interest; where there is conflict, informed consent of the scheme creditors is required: at [25]-[27].
  1. The Court emphasised the need for companies proposing schemes of arrangement and proposed scheme managers to be mindful of the interests of the creditors in discharging their duties, and to have “transparency … be the guiding principle of all corporate actions when creditors’ interests are affected, as is the case in a scheme of arrangement”: at [28]-[32], [37].
  1. Generally, where there is a breach of duty to disclose material information by the company and the Scheme Manager, it would result in the Scheme being set aside and put to a fresh vote; the Scheme Manager would also have been deprived of his costs: at [33], [36].
  1. On the facts of this case, however, the Court decided not to set aside the Scheme because it had already been implemented for more than two (2) years and it was not practical to set it aside without causing more harm to the company and the creditors; instead, the parties are directed to reach an agreement on the appropriate amount of professional fees awarded for the Scheme Manager: at [33]-[34].
  1. The Court further stated as obiter that “a commercial practice [in this case of the Scheme Managers disclosing success-based fee arrangements to scheme creditors or to the courts], no matter how widespread, does not have the force of law by dint of accident of vintage or absence of protest if it is contrary to legal principle”: at [14].