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Re Medora Xerxes Jamshid (in his capacity as the private trustee in bankruptcy of Tan Han Meng) (Planar One & Associates Pte Ltd (in liquidation), non-party) [2024] SGHC 196
Issue: Can a proof of debt claim for breach of fiduciary duty / director’s duties be accepted by a private trustee under the proof of debt process in bankruptcy?
Continue reading “Case: A claim for breach of fiduciary duty can a provable debt in bankruptcy”
Significance: The bankrupt made certain cheque payments to his family members in the clawback period prior to his bankruptcy. The trustee in bankruptcy applied to claw back these payments for being unfair preference (as two of the family members were also creditors of the bankrupt) and undervalue transaction (this was essentially a gift to his daughter which she used to pay for expenses for her wedding, which cost a total of about S$135,000). The statutory presumption of unfair preference was not found to have been rebutted. The court found that it would not be justified to not order a claw back for the gift to the daughter as it would otherwise be tantamount to the bankrupt’s creditors footing the bill of the daughter’s “lavish wedding”.
Significance: In a rare split decision, the majority of the Court of Appeal (Sundaresh Menon CJ and Tay Yong Kwang JA; Woo Bih Li J dissenting) refused recognition of foreign bankruptcy order due to breach of natural justice.
The majority found that the evidence did not prove that:
(i) notices of the bankruptcy application in Indonesia were properly served on the appellants;
(ii) the appellants had actual knowledge of the bankruptcy proceedings but chose not to appear in them.
The appellants were thus deprived of the opportunity to challenge validity of service or liability under the guarantees and object to the making of the bankruptcy orders.
The Court left open the issue of the correctness of the legal principles on recognition of foreign bankruptcy orders: at [22].
Supreme Court case summary found here.
Significance: Singapore High Court recognised a foreign bankruptcy order from Indonesia and considers the legal principles and restrictions on the effecting of the order.
Update: this decision has been reversed on appeal. Discussion on the appeal decision is found here.
Continue reading “Case Update: Heince Tombak Simanjuntak v Paulus Tannos [2019] SGHC 216”
Significance: Singapore High Court, in determining a case of undue preference and breach of fiduciary duties by a former director of a company, considered the application of the running account principle defence. The principle is that a transaction, which on its face is an undue preference, can be upheld on the basis that it was made under a mutually beneficial running account. The Court held that the fact that an impugned payment was made pursuant to a running account is by itself insufficient to negate an intention to prefer – it must have been made with the intention of obtaining new value to keep the business going. The running account principle, so understood, is not strictly an independent defence, but goes to proving that the insolvent company was acting solely by reference to proper commercial considerations in making the payment and was not influenced at all by a desire to prefer the creditor: [55].
The Court also considered that the court’s broad discretion under s 99(2) of the Bankruptcy Act allows it, in an appropriate case, to order a partial reversal of transactions found to be undue preferences if justice so requires. Such an order may be justified, for example, in clear cases where the parties’ claims are uncontroversial, or where there is an agreement between the preferred creditor and the liquidators as to the amount which ought to be set aside for the claims of the other unsecured parties: [76].
The Court also followed the English Court of Appeal’s decision in Liquidator of West Mercia Safetywear Ltd v Dodd and another (1988) BCC 30 (“West Mercia”) in holding a director personally liable for procuring an undue preference on the basis of breach of fiduciary duties.