Court of Appeal · Decided 21 April 2025

A creditors' scheme's disclosure to creditors about the money available was enough

UT Singapore Services Pte Ltd v Goh Thien Phong and others and another appeal

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[2025] SGCA 17Case no. Court of Appeal / Civil Appeal No 54 of 2024

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A creditors' scheme's disclosure to creditors about the money available was enough

Summary by laws.sgParagraphs [4], [142]

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Grounds of decision

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Introduction
[1] The classification of creditors is a crucial element in a scheme of arrangement. While the rules on classification are settled and clear, often it is the application of those rules that raises questions. However, getting the classification right is imperative as it goes to the court’s jurisdiction to sanction a scheme. This is for good reason. In a scheme, the majority of creditors or of a class of creditors seek to cram down and bind minority dissentients to the rights proposed under the scheme in substitution of their existing rights against the debtor. For this compulsion to be justifiable, each class of creditors must be bound by a common interest arising from a similarity of rights that enables them to sensibly consult with each other and decide on how best they should exercise their vote. To cram down where the creditors are unable to sensibly consult as a group because of a dissimilarity of rights would be to unfairly prejudice the minority dissentients.
[3] Alongside the principal issue are two ancillary issues. First, whether the appellant, UT Singapore Services Pte Ltd (“UTSS”), was prohibited from raising its objections to the classification of creditors at the sanction hearing because it failed to do so at the convening hearing, without good reason. Second, whether the liquidators had made adequate disclosure to the creditors when presenting the proposed scheme.
[4] In Re Hin Leong Trading (Pte) Ltd (in compulsory liquidation) and another matter [2024] SGHC 256 (the “GD”), a Judge of the General Division of the High Court (the “Judge”) found on the principal issue that the creditors with a claim to secured interest were properly classified in a single class. The Judge also found that: (a) UTSS was prohibited from raising the classification issue at the sanction hearing because it failed, without good reason, to do so at the convening hearing; and (b) the liquidators had made adequate disclosure. Dissatisfied, UTSS appeals against the whole of the Judge’s decision.
Facts
[6] The present appeals arise from the well-known failure of Hin Leong Trading (Pte) Ltd (“Hin Leong”) and its related entities, which are in liquidation. Hin Leong was compulsorily wound up on 8 March 2021, and Mr Goh Thien Phong (“Mr Goh”) and Mr Chan Kheng Tek (“Mr Chan”) (collectively the “Liquidators”) were appointed as its liquidators. Prior to this, Hin Leong was placed under interim judicial management and judicial management on 27 April 2020 and 7 August 2020, respectively. The Liquidators were previously Hin Leong’s interim judicial managers and judicial managers.
[7] The appellant is UTSS and the respondents are Hin Leong and the Liquidators. Hin Leong was a company primarily engaged in the business of oil trading. UTSS operates a petroleum storage facility. Between December 2018 and April 2020, Hin Leong and UTSS entered into various Tankage and Storage Agreements and spot contracts (collectively, the “Storage Agreements”) which incorporated UTSS’s “Tankage and Storage: General Terms and Conditions”.
[8] Oil purchased by Hin Leong would be delivered by ships or through inter-tank transfers at the oil storage terminals operated by UTSS. The purchase was financed by various import financing and inventory financing agreements with several banks (the “Financing Banks”). Following delivery, Hin Leong would either store, sell or blend the oil in a variety of ways. Some of the oil would be discharged into the following storage facilities: (a) tanks of UTSS; (b) tanks of a related entity, Ocean Tankers (Pte) Ltd (“Ocean Tankers”); (c) ships chartered by Hin Leong and operated as floating storage units; and (d) ships controlled by Ocean Tankers.
Disputes over the oil purportedly owned by Hin Leong
[9] When Hin Leong was placed under interim judicial management, some of the oil that purportedly belonged to Hin Leong became the subject of interpleader proceedings (the “Interpleader Proceedings”). The details of the Interpleader Proceedings are briefly set out below:
(a) HC/OS 489/2020 (the “UTSS Interpleader”) is an interpleader proceeding commenced by UTSS on 22 May 2020 to seek relief in respect of various third parties’ assertions of ownership and/or security claims over the oil stored in some of UTSS’s storage facilities (ie, the “UTSS Disputed Tanks”). The oil stored in these storage facilities was also subject to various court injunctions. The oil was eventually discharged and sold by UTSS, and the sale proceeds paid into court pending determination of the UTSS Interpleader.
(b) HC/OS 549/2020, HC/OS 593/2020, HC/OS 616/2020 and HC/OS 631/2020 (collectively, the “Ocean Tankers Interpleaders”) are interpleader proceedings commenced by the interim judicial managers of Ocean Tankers between 10 June 2020 and 29 June 2020 to resolve competing claims in respect of the oil stored in the vessels controlled by Ocean Tankers. The oil in question was sold and the sale proceeds paid into court pending determination of the Ocean Tankers Interpleaders.
[10] On 20 May 2020, UTSS issued a notice of termination of the Storage Agreements. Among other things, UTSS demanded: (a) the sum of S$26,673,150 as “compensation” for Hin Leong’s early termination of the Storage Agreements (on the basis of Hin Leong’s insolvency) (the “Termination Sum”); and (b) various outstanding storage fees in the sum of S$8,712,681 (the “Storage Fees”). UTSS has claimed a further sum of approximately S$2.8m (as of 10 July 2020) as storage fees for the oil stored in the tanks which were subject to injunctions (the “Injuncted Tanks”). UTSS claimed that such storage fees would continue to accrue until Hin Leong returned possession of the Injuncted Tanks to UTSS.
[12] Accordingly, UTSS asserts that: (a) it had a general lien over all the oil that was stored in the Filled Tanks pursuant to the Storage Agreements; and (b) it was entitled to a general lien over the Filled Tanks Proceeds (and therefore in the Uninjuncted Proceeds in so far as the Filled Tanks Proceeds formed a part of it) in priority to all security interests to satisfy its claims for the Termination Sum and the Storage Fees.
[13] UTSS is not the only creditor alleging a security interest over the Uninjuncted Proceeds. The Financing Banks assert that pursuant to the terms of the respective financing agreements, security interests were created over the oil in question and the Uninjuncted Proceeds.
[14] In view of the competing claims over the Uninjuncted Proceeds, on 31 August 2021, the Liquidators filed HC/SUM 4108/2021 (“SUM 4108”) seeking directions on the validity of the security interests that were asserted by UTSS and the Financing Banks. On 7 February 2022, the court directed the Liquidators to consider filing a separate application for directions pertaining to UTSS’s claims. The Liquidators did this on 14 March 2022 with HC/SUM 1003/2022 (“SUM 1003”).
[15] In SUM 4108, the Liquidators sought determination of whether the Financing Banks possessed valid securities over the oil in question and the proceeds of sale thereof. Specifically, whether: (a) the financing under the import financing or inventory financing agreements was capable of creating a “pledge by attornment” in favour of the Financing Banks; and (b) whether such “pledge by attornment” (if valid) was a security interest registrable as a charge under s 131(3)(d) of the Companies Act 1967 (2020 Rev Ed) (the “Companies Act”) before it could be enforceable.
[16] In SUM 1003, the Liquidators sought declarations that: (a) UTSS was not entitled to the Termination Sum; (b) further or alternatively, UTSS was not entitled to exercise a lien over the oil stored as of 27 April 2020 in the Filled Tanks to satisfy the Termination Sum; and (c) UTSS was not entitled to exercise a lien over the oil stored as of 27April 2020 in the Filled Tanks to satisfy the Storage Fees.
[17] The Interpleader Proceedings, SUM 4108 and SUM 1003 are pending before the court.
The proposed scheme of arrangement
[18] On 17 May 2024, the Liquidators proposed a scheme of arrangement (the “Scheme”) at a creditors’ dialogue session (the “17 May Dialogue Session”). The Scheme sought to distribute US$80m of the Uninjuncted Proceeds (the “Scheme Consideration”) to the “Scheme Creditors” who were defined as any person who held a claim against Hin Leong including any interest accruing on and calculated as at 8 March 2021.
[19] Two voting classes were contemplated under the Scheme:
[20] The Scheme provided for all Potential Secured Creditors to irrevocably and irreversibly waive any security interests they might have over the Uninjuncted Proceeds. Additionally, the Scheme Consideration was to be distributed to all the Scheme Creditors on a pari passu basis in respect of their respective claims (which had been admitted by the chairpersons), calculated in accordance with a formula provided for in the Scheme.
[21] In so far as the Potential Secured Creditors were concerned, the rationale for the Scheme was explained in the following terms. As their claims to security interests were disputed and were yet to be determined by the court in the Interpleader Proceedings and related applications, the recoveries thereto were uncertain. Absent the Scheme, any distribution of the Scheme Consideration was only possible after the full and final determination of the Interpleader Proceedings and related applications.
[22] On 6 June 2024, the Liquidators applied in HC/OA 555/2024 (“OA 555”) for leave to convene a scheme meeting for the Scheme Creditors to consider and, if they thought fit, approve the Scheme. The Liquidators circulated a copy of OA 555, a draft explanatory statement and the proposed scheme timelines to the Scheme Creditors. By this time, the Scheme had obtained in-principal approval from: (a) 15 out of 25 in number of the Potential Secured Creditors Class (representing 55% in value); and (b) 19 out of 125 in number of the Unsecured Creditors Class (representing 87% in value). None of those creditors had raised any objections to the classification in the Scheme. Notably, UTSS had not engaged with the Liquidators on the Scheme at that stage.
[23] On 14 June 2024, the court directed that any creditor who wished to file a reply affidavit in OA 555 was to do so by 21 June 2024 and to attend a case conference on 25 June 2024 to take directions on the matter. At the case conference, the court gave directions for any party who wished to file written submissions in respect of OA 555 to do so by 28 June 2024 and fixed the hearing of the application for 1 July 2024. A notice of these directions was provided to all the Scheme Creditors on the same day.
[25] On 10 July 2024, for the first time, UTSS raised objections on classification with the Liquidators. UTSS sought: (a) a reclassification of UTSS into a class of its own for the purpose of voting on the Scheme; or (b) a reduction in the Scheme Consideration by a sum of S$58,220,683. UTSS’s request was rejected.
[27] At the creditors’ meeting on 22 July 2024, the Scheme was approved by 95.7% of the Scheme Creditors from the Potential Secured Creditors Class (representing 98.7% in value), and 100% of the Scheme Creditors from the Unsecured Creditors Class, present and voting. UTSS was the only creditor who voted against the Scheme.
[28] On 25 July 2024, the Liquidators applied for sanction of the Scheme in HC/OA 726/2024 (“OA 726”). On 30 August 2024, the Judge sanctioned the Scheme and dismissed the remaining prayers in SUM 1957.
[29] On 17 September 2024, UTSS appealed the whole of the Judge’s decision in respect of OA 726 and SUM 1957 in CA/CA 54/2024 (“CA 54”) and CA/CA 55/2024 (“CA 55”) respectively.
The decision below
[30] Three issues were raised in OA 726. First, the parties disagreed on whether the court could and should consider UTSS’s classification objections at the sanction hearing. While UTSS submitted that classification issues went towards the court’s jurisdiction to sanction the Scheme and that UTSS had good reasons for not raising its objections earlier, the respondents’ position was that UTSS was not entitled to challenge the classification under the Scheme as those objections could and should have been raised at the convening hearing, and UTSS had not provided any legitimate explanation for failing to do so.
[31] Second, the parties disagreed on the classification under the Scheme. UTSS’s position was that the Potential Secured Creditors could not be properly classified without first determining their security claims. In any event, UTSS’s rights were so dissimilar from the other Potential Secured Creditors that it could not be placed in the same class. The respondents submitted that it was legitimate for the Liquidators to propose a scheme classifying creditors according to their potential rights and that UTSS fell squarely within the Potential Secured Creditors Class.
[32] Third, the parties were divided on whether the Liquidators had fallen short of their disclosure obligations. Three grounds were raised in UTSS’s written submissions. However, none of the grounds was pursued before the Judge. Instead, UTSS submitted that the Liquidators: (a) should explain why they no longer sought to pursue the full and final determination of the related applications (ie, SUM 4108 and SUM 1003); and (b) should have disclosed to the creditors what the Potential Secured Creditors were giving up by waiving their security rights. UTSS also submitted that the Liquidators fell short of their disclosure obligations to the Scheme Creditors as they did not disclose any information about the total amount of Uninjuncted Proceeds. This was compounded by the Liquidators’ intention to use the balance of the Uninjuncted Proceeds to pay their fees and that of their lawyers. The Liquidators disputed these allegations and submitted that they had made adequate disclosure.
[34] Several of the Financing Banks also tendered written submissions before the Judge. Oversea-Chinese Banking Corporation Limited (“OCBC”) took the position that sanction should be granted. OCBC submitted that: (a) the relevant comparator was not insolvent liquidation as Hin Leong was already in liquidation; (b) there was no need for the claims to security interest to be determined for the purpose of classification; and (c) there was no basis for UTSS to be in a separate class of its own. Coöperatieve Rabobank U.A., Singapore Branch similarly submitted that it was appropriate to classify UTSS in the Potential Secured Creditors Class.
[35] The Judge held that creditors might only raise classification objections at the sanction hearing if there was a good explanation why they had not raised them earlier (see GD at [33]). Where there was no good explanation, the court was not required to consider the objections at the sanction hearing (at [38]). As UTSS did not have a good explanation, there was no need to revisit the issue of classification at the sanction hearing in this case (at [40]–[43]).
[36] Nonetheless, the Judge considered UTSS’s classification objections. The Judge held that the “appropriate comparator” was not insolvent liquidation. Instead, it was “proceeding with a determination of security claims, with all the time, trouble, and expense that entailed” (at [60(a)]). Applying this, UTSS’s rights were not so dissimilar to the other Potential Secured Creditors’ rights to require it to be placed in a separate class. Even if UTSS had a better claim than the other Potential Secured Creditors, the Liquidators were entitled to adopt a “fairly robust” approach and classify creditors in a “broad and objective manner” (at [62]–[64]). The Judge found that the Scheme was reasonable and, in view of the substantial majority vote in favour of the Scheme, it was one which a man of business or an intelligent and honest man, being a member of the class concerned and acting in respect of his interest, would reasonably approve (at [67]–[68]).
[37] The Judge also held that UTSS’s complaints regarding inadequate disclosure were unmeritorious (at [46] and [49]–[54]). The Judge thus sanctioned the Scheme. As SUM 1957 dealt with primarily the same objections raised by UTSS at the sanction hearing, the Judge also dismissed the remaining prayers therein (at [70]).
The parties’ cases on appeal
[38] The parties’ arguments on appeal largely mirror their arguments below. We set out the parties’ submissions in broad strokes, before dealing with them specifically in this judgment when we consider the issues.
The appellant’s case
[40] UTSS also objects to the classification of creditors under the Scheme. It contends that contrary to the Judge’s conclusion, the appropriate comparator is an insolvent liquidation, and the classes of creditors under the Scheme were improperly constituted. UTSS’s arguments can be distilled into two main points. First, classifying creditors with undetermined security interests in a single class is impermissible. There must be an attempt to assess their claims for the purpose of classification. The fact that the Potential Secured Creditors all assert security interests against Hin Leong does not mean that they have the same rights. Given the limited amount of Uninjuncted Proceeds as compared to the large amount of purported secured debts, some of the Potential Secured Creditors must be unsecured creditors. This makes placing all the Potential Secured Creditors in a single class inappropriate. While it may be possible in an appropriate case for a scheme to place creditors with uncertain claims in a single class, it is crucial that the scheme provides for a claims determination mechanism for those claims. Second, even if it is possible to have a Potential Secured Creditors Class, UTSS should be placed in a separate class of its own from the Financing Banks. UTSS has clearly established a security interest over the Filled Tanks Proceeds, whereas the Financing Banks have not established any security interest over any of Hin Leong’s assets, let alone the Uninjuncted Proceeds.
[41] UTSS further contends that the Scheme is not one which a man of business or an intelligent and honest man would reasonably approve for various reasons. First, it is not a rational compromise. Second, the Liquidators have a conflict of interest because the difference between the Scheme Consideration and the true value of the Uninjuncted Proceeds is earmarked for the Liquidators’ fees. Third, the scheme documents ought to have disclosed the real difference between the Scheme Consideration and the true value of the Uninjuncted Proceeds. The Uninjuncted Proceeds are in fact more than the disclosed US$88.3m.
[42] Arising from the second and third points above (at [41]), UTSS challenges the sufficiency of the Liquidators’ disclosure of information to the creditors. The Potential Secured Creditors could not exercise their voting rights meaningfully without knowing the quantum of the Uninjuncted Proceeds and the full details of the Liquidators’ financial incentives.
The respondents’ case
[43] The respondents defend the Judge’s decision not to consider UTSS’s classification objections at the sanction hearing because it had not provided a good reason or explanation for not raising the objections earlier.
[45] As the Scheme had received overwhelming support from the Scheme Creditors, who were large reputable financial institutions, it is one which a man of business or an intelligent and honest man would reasonably approve.
[46] Finally, the respondents contend that UTSS’s complaints on the adequacy of disclosure are unmeritorious. The allegations on conflict of interest and personal gain are raised for the first time on appeal and should not be permitted. In any event, it is incorrect to claim that the Liquidators did not disclose the total amount of Uninjuncted Proceeds. It is evident that the amount is US$88.3m.
Issues to be determined
[47] Two broad categories of issues arise for consideration in the present appeals:
The scheme of arrangement regime
[48] It is helpful to first outline the scheme of arrangement process. The scheme of arrangement regime is primarily governed by s 210 of the Companies Act. Section 210 states that:
[49] The process for a scheme of arrangement was previously canvassed by this court in 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 (“TT International”). The process comprises three distinct stages.
[51] After the court issues directions for the classification of the creditors, notices summoning the meeting(s), accompanied by an explanatory statement in accordance with s 211 of the Companies Act, must be sent to the creditors (TT International at [65]). Thereafter, the proposed scheme creditors are required to submit their proofs of debt together with any supporting documents to the chairman of the meeting(s) for his adjudication. The chairman has the responsibility of undertaking the quasi-judicial task of adjudicating disputes as to the voting rights of anyone claiming to be a creditor (TT International at [66]–[67]).
[52] The second stage involves the conduct of the creditors’ meeting(s). As summarised in TT International in relation to s 210(3) of the Companies Act (Cap 50, 2006 Rev Ed) (which is equivalent to s 210(3AA)–(3AB) of the Companies Act) (at [69]):
Whether the court should consider UTSS’s classification objections at the sanction hearing
[55] In our view, the issue turns on whether the classification of creditors is a matter that goes to the jurisdiction of the court to sanction a scheme of arrangement. If it is, it must follow that the Court is obliged to consider any objections on the classification of creditors at the sanction hearing, regardless of whether the objecting creditor had a good reason for failing to raise it earlier whether that be at the convening hearing or otherwise.
[56] The settled position is that the appropriate classification of creditors goes to the heart of the court’s jurisdiction to sanction a scheme. In TT International, this court stated that the classification of creditors according to their separate interests was not just a matter of form, and that “[i]f the scheme creditors’ meeting(s) are not properly conducted, the court has no jurisdiction to sanction the proposed scheme” (TT International at [58]).
[57] The position stated in TT International echoes the position in England on s 425(2) of the Companies Act 1985 (c 6) (UK) (the “UK Companies Act 1985”) (which has since been replaced by s 899(1) of the UK Companies Act 2006 (c 46) (the “UK Companies Act 2006”)). Section 425(2) of the UK Companies Act 1985 is in pari materia with s 210(3AB) of the Companies Act. In Re Hawk Insurance Co Ltd [2002] BCC 300 (“Re Hawk Insurance”), the court’s jurisdiction under s 425(2) to sanction a scheme of arrangement was considered by the English Court of Appeal. The court expressed the view that the court’s jurisdiction was limited to sanctioning a compromise or arrangement between the company and its creditors or any class of creditors (as the case may be) which has been approved by the requisite majority at a meeting of the creditors or that class of creditors (as the case may be) (Re Hawk Insurance at [17]). Therefore, if the classification of creditors is found to be incorrect at the sanction stage, “the court will find that the condition which gives rise to its power to sanction is absent” as “none of the linked compromises or arrangements will have been approved by the requisite majority at a relevant meeting because there have been no meetings of the distinct classes” (Re Hawk Insurance at [17]).
[58] Other English cases have expressed the same view. In Re Smile Telecoms Holdings Ltd and another [2022] Bus LR 591 (“Smile Telecoms”), the High Court of England and Wales observed that “[q]uestions of class composition have continued to be regarded as going to the jurisdiction of the court to sanction schemes under the revised wording of Part 26 of the [UK Companies Act 2006]” (at [47]). A similar view was expressed in Re DX Holdings Ltd and other companies [2010] EWHC 1513(Ch) (“DX Holdings”) where the court observed that as no creditors objected to the classification of creditors at the convening stage, it would be “regrettable” if creditors asked the court to make a different value judgment at the sanction stage. However, “their default of appearance cannot confer jurisdiction where none existed before” (at [9]).
[59] Academic commentaries are also of the same voice. In The Law and Practice of Restructuring in the UK and US (Christopher Mallon et al eds) (Oxford University Press, 2nd Ed, 2017) at para 6.99, the following was stated:
The same view was expressed in Goode on Principles of Corporate Insolvency Law (Kristin van Zwieten gen ed) (Sweet & Maxwell, 5th Ed, 2018) at para 12-19.
[60] It is therefore clear that issues of class composition go towards the court’s jurisdiction to sanction the scheme. The court should therefore consider and determine any objections in relation to the classification of creditors at the sanction hearing, even if it should have been raised earlier. What then is the consequence of not raising the objections earlier, without good reason? We turn to consider this next.
The consequence of not raising the classification objections earlier
[61] Prior to TT International, there was no clear local authority on whether the court should entertain objections regarding the classification of creditors at the convening stage. Two contrasting approaches were open for adoption. The first was the approach in the English Practice Statement (Companies: Scheme of Arrangement) [2002] 1 WLR 1345 (the “2002 Practice Statement”) that the court will consider whether more than one meeting of creditors is required and the appropriate composition of those meetings at the convening stage. The other was Lord Millett NPJ’s view in UDL Argos Engineering & Heavy Industries Co Ltd v Li Oi Lin [2001] 3 HKLRD 634 which was that issues concerning creditor classification should be left to the sanction hearing (see TT International at [60]).
[62] The issue was settled by TT International, where this court stated that the court must consider issues of creditor classification at the convening stage (at [59] and [62]). A preference for the approach in the 2002 Practice Statement was expressed as it provided a greater degree of certainty in the scheme process (at [60]–[62]).
[63] TT International summarised the approach in the 2002 Practice Statement in the following terms (at [59]):
[64] Thus, as a result of TT International, it would seem that a creditor, who seeks to raise objections regarding class composition at the sanction hearing, should be expected to provide a good explanation or offer a good reason for why the objection was not raised earlier. However, the question of the consequences that should follow in the absence of good reasons was not considered in TT International. Indeed, it was also not addressed in the 2002 Practice Statement.
[65] The respondents place significant weight on the Practice Statement (Companies: Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006) dated 26 June 2020 (the “2020 Practice Statement”) in aid of their argument that UTSS ought to be shut out from raising the objections on classification at the sanction hearing, absent a good reason or explanation. In our view, the 2020 Practice Statement does not assist the respondents.
[66] The 2020 Practice Statement largely mirrors the position in the 2002 Practice Statement (collectively the “Practice Statements”). Like the 2002 Practice Statement, it requires the court to consider the issue of classification at the convening hearing (para 11), and creditors who raise objections on classification at the sanction hearing have to offer a good reason why the objection was not taken earlier (para 10). However, the 2020 Practice Statement also does not address the question of non-compliance. Thus, it does not aid the respondents’ argument that the court must shut out the objecting creditor in absence of a good reason or explanation.
[67] The Judge relied on two decisions, Smile Telecoms and Re ColourOz Investment 2 LLC and others [2021] 1 BCLC 55 (“ColourOz”), to arrive at his conclusion. It is instructive to examine them.
[68] ColourOz was decided after the release of the 2020 Practice Statement. There the English High Court reviewed the process for effecting a scheme of arrangement. Snowden J (as he then was) stated that (at [44]):
[71] Addressing the question of whether the court was required to reconsider the applicability of s 901C(4), the English High Court first remarked that while questions of class composition went to the jurisdiction of the court to sanction schemes, it was an open question whether a decision under s 901C(4) similarly went to the jurisdiction of the court to sanction the plan, such that if a point were raised it “would have to be reconsidered at sanction in the same way as the more conventional questions of the composition of the classes that have actually voted” (Smile Telecoms at [47]). The court then stated as follows (at [48]):
[72] On the facts of the case, Afreximbank did not appear at the sanction hearing and provided no reason for why it did not raise its objections at the convening hearing (Smile Telecoms at [49]). As such, the court held that he was not required, and could not attempt, to analyse Afreximbank’s allegations. There was therefore no reason to re-evaluate the decision that some of the scheme participants had no genuine economic interest in the company (Smile Telecoms at [55]).
[73] Referring to paragraph 48 of Smile Telecoms cited above, the Judge was of the view that Smile Telecoms stood for the proposition that if a creditor had not disputed a classification issue at the convening stage and did not provide a good reason for its failure to do so, the court is not required to address that issue again at the sanction hearing (see GD at [38]). UTSS disagrees with the Judge’s interpretation of Smile Telecoms. We agree with UTSS’s submission. With respect, Smile Telecoms was not about the issue of classification.
[74] In our view, it would be incorrect to read Snowden LJ’s remarks in Smile Telecoms as reflecting the view that matters of jurisdiction such as the classification of creditors should not be considered at the sanction hearing if it had not been raised at the convening hearing without good reason. This would be contrary to the views he expressed in ColourOz and there was no indication in Smile Telecoms that he intended to depart from that view.
[76] For completeness, we also consider the two additional decisions which the respondents submit support their view. They are DX Holdings and Re Ophir Energy plc [2019] EWHC 1278 (Ch) (“Ophir Energy”). For the reasons explained above (at [58]), DX Holdings does not support the respondents’ position.
[77] Ophir Energy also does not assist the respondents. The issue in Ophir Energy was the adequacy of the explanatory statement to the scheme of arrangement. One of the company’s shareholders, Legal & General Investment Management (“LGIM”) had written to inquire whether, in theory, a shareholder could challenge a scheme on the basis that all the necessary information had not been disclosed to the creditors. The company responded to LGIM, but LGIM did not raise any further issues on the adequacy of the explanatory statement. Three days before the sanction hearing, LGIM sent an email objecting to the scheme on the ground of inadequate disclosure but stated that it would not be making an application to oppose the scheme being sanctioned. LGIM did not attend the sanction hearing or otherwise communicate its concerns to the court. The English High Court held that in the absence of LGIM appearing to raise its concerns with the court and to explain the detailed background to the points made, it was impossible for the court to form a judgment as to whether the matters identified by LGIM were material matters that should have been dealt with differently in the explanatory statement (Ophir Energy at [32]). LGIM’s reasons for failing to appear at the hearing were unmeritorious and its failure to raise its concerns at an earlier stage “had all the hallmarks of a late spoiling tactic” as opposed to a genuine concern on the part of LGIM as to the adequacy of the explanatory statement. Finally, LGIM did not actually suggest that the scheme should not be sanctioned or that the sanction hearing should be adjourned for further evidence or consideration (Ophir Energy at [33]–[37]).
[78] The decision in Ophir Energy echoed the analysis in Smile Telecoms in that, like Afreximbank, LGIM did not convey its concerns to the court and, in fact, did not even contest the sanction of the scheme. As a result, it was “impossible” for the court to determine the issues raised. This is distinguishable from the present case where UTSS has conveyed its objections and the grounds for such objections to the court. We therefore do not find Ophir Energy as an authority for the proposition that the respondents contend for.
[79] We conclude on this issue by briefly addressing the policy concerns raised by the respondents. According to the respondents, the practices governing the scheme of arrangement process in Singapore should facilitate the early ventilation of classification issues. Upholding the Judge’s approach would facilitate that. The respondents submit that UTSS’s position would instead encourage creditors to adopt delay tactics and raise classification objections only at the sanction hearing.
[80] It is incontrovertible that an argument based on policy has no relevance if the statutory framework is clear. The Companies Act is clear that the classification of creditors is a matter of jurisdiction. Accordingly, we do not accept the respondents’ argument that the court is entitled to disregard a classification objection that is raised late and without good reason on the basis of any policy consideration that is not reflected in the relevant statutory provisions.
Whether UTSS had a good reason for not raising its objections earlier
[84] We agree with the Judge that this reason did not pass muster. First, we do not accept UTSS’s explanation that it should only raise its objection after it became apparent that the Scheme would likely pass. That flies against the views expressed in TT International and the jurisprudence we have canvassed above that such objections should be raised at the convening hearing promptly.
[85] Second, UTSS’s concern that the Scheme would pass regardless of how it voted should have arisen even earlier when not a single objection to the Scheme was raised as of 6 June 2024 (ie, the date OA 555 was filed). As pointed out by the respondents, the absence of any objections to the Scheme at 6 June 2024 should have raised the real prospect of the Scheme obtaining approval from the Scheme Creditors bar UTSS.
[86] Third, while UTSS might have had raised its objections nine days after the convening hearing, the classification of creditors was made known to all the Scheme Creditors from as early as the 17 May Dialogue Session, well before the convening hearing. UTSS thus had ample time and opportunity between the 17 May Dialogue Session and the convening hearing to raise its objections but failed to do so. That this was in the face of the Judge specifically directing on 14 June 2024 for the creditors to file reply affidavits to raise their objections by 21 June 2024, if any, is particularly troubling.
[87] Based on the arguments advanced by UTSS before the Judge and before us, it is plain that UTSS’s objection to the Scheme was principally that it should not be placed in the Potential Secured Creditors Class because its security interest was not disputed or disputable, and ranked ahead in priority to the security interests of the other Potential Secured Creditors (to the extent such interests did exist) in the Filled Tank Proceeds. Seen in this light, UTSS’s justification for not raising its objection because it wanted to first determine whether the Scheme was likely to pass rings hollow. It seems to us that UTSS could and should have raised the issue at the convening hearing, regardless of how the vote on the Scheme would have gone.
Whether the Scheme should be sanctioned
[89] We turn to consider the central issue in the present appeals – whether the Judge had erred in sanctioning the Scheme. This inquiry is situated in the third stage of the scheme of arrangement process (see above at [53]). The court must be satisfied of three requirements before sanctioning the scheme. These requirements were set out by this court in The Oriental Insurance Co Ltd v Reliance National Asia Re Pte Ltd [2008] 3 SLR(R) 121 (“Oriental Insurance”) (at [43]) as follows:
[90] Subsequent to this court’s decision in Oriental Insurance, the English courts included a fourth requirement to the aforementioned test. Namely, the court is to consider whether there is any “blot” or defect in the scheme that would, for example, make it unlawful or in any other way inoperable (Re Noble Group Ltd [2019] 2 BCLC 548 (“Noble Group (No 2)”) at [17]; Re AGPS BondCo plc [2025] 1 All ER (Comm) 26 at [115]–[117]; Kington S.À.R.L. and others v Thames Water Utilities Holdings Ltd and others [2025] EWCA Civ 475 at [100]). We accept this as an appropriate refinement to the requirements stated in Oriental Insurance. The present appeals only engage the first and third requirements.
Whether the classification of creditors under the Scheme was appropriate
[91] As a preliminary point, we agree with UTSS that the question of the appropriate classification of creditors relates to the first Oriental Insurance requirement. Issues relating to the classification of creditors in a scheme affects the fulfilment of the statutory requirement regarding the approval of a majority in number and value of the creditors pursuant to s 210(3AA)–(3AB) of the Companies Act. In the English High Court decision in Noble Group (No 2), it was said that the first requirement involves an analysis of “questions of class composition [and] whether the statutory majorities were obtained” (at [17]). Although the court generally considers classification issues at the convening stage (see TT International at [59] and [62]), such issues relate to whether the scheme should be sanctioned for reasons explained earlier and therefore are appropriately considered under the first requirement. In any case, as UTSS had only raised its classification objections after the convening hearing, the question of classification arises for consideration at the sanction stage for the purposes of the present appeals. With that we turn to the central issue – were the Potential Secured Creditors correctly classified in a single class?
The law on classification
[92] The law on the classification of creditors in a scheme of arrangement is well-settled. The general principle is that persons whose rights are so dissimilar that they cannot sensibly consult together with a view to their common interest must be classed separately. This principle is known as the “dissimilarity principle”. On the other hand, persons whose rights are sufficiently similar that they can consult together with a view to their common interest should be summoned to a single meeting (TT International at [130]–[131]). The test assesses the similarity or dissimilarity of the legal rights against the company as opposed to the similarity or dissimilarity of the interests derived from such rights (TT International at [130]).
[93] In assessing the similarity or dissimilarity of the creditors’ rights, the court considers the creditors’ rights in the “appropriate comparator” and the treatment of those rights under the scheme. If the position of a creditor or a group of creditors will improve or be disadvantaged to such a different extent vis-à-vis the other creditors because of the terms of the scheme assessed against the appropriate comparator, then such creditor or creditors should be placed in a different voting class from the other creditors (TT International at [140]).
[94] As previously summarised by this court in Pathfinder Strategic Credit LP and another v Empire Capital Resources Pte Ltd and another appeal [2019] 2 SLR 77 (“Pathfinder”), there are three broad steps in assessing whether the classification of creditors under the scheme is appropriate (at [88]):
[95] Therefore, critical to the question of classification is correctly identifying the appropriate comparator and the rights of the creditor that the scheme seeks to compromise.
The appropriate comparator
[96] We begin by identifying the appropriate comparator. The appropriate comparator is the “most likely scenario in the absence of scheme approval”, which will often, although not necessarily, be insolvent liquidation (Pathfinder at [87]; TT International at [140]).
[97] The Judge concluded that the appropriate comparator was “proceeding with a determination of security claims, with all the time, trouble and expense that entailed”, and not an insolvent liquidation. UTSS challenges this conclusion. It submits that the appropriate comparator is instead the determination of the rights of the Potential Secured Creditors in the Interpleader Proceedings and related applications for the purpose of effecting a distribution in accordance with the statutory prescribed sequence of priorities. Accordingly, placing the Potential Secured Creditors in one class without first assessing whether each has a security interest and if so, the priority it has vis-à-vis the other security interests (to the extent they exist) is impermissible. The assessment could be done by incorporating an adjudication mechanism in the Scheme, or by way of the Liquidators’ own assessment. Failing to make the assessment would mean that: (a) secured creditors would be classified together with unsecured creditors; and (b) as between secured creditors, the respective security interests are not ranked in terms of priority. While UTSS accepts that it may be possible in an appropriate case for a scheme to include uncertain claims, it asserts that, for the purpose of classification, the scheme must incorporate a mechanism for the determination of those claims. UTSS relies on the decisions of Re Hawk Insurance and Re T&N Ltd and others (No 3) [2007] 1 BCLC 563 (“Re T&N”) in support of its submissions. The respondents submit that the Judge correctly concluded on the appropriate comparator as all the Potential Secured Creditors are in the same position, namely, they have a contingent security interest which was subject to determination in litigation in the Interpleader Proceedings and related applications.
[99] This brings us to the question of an adjudication mechanism which UTSS contends is a necessary component, for the purpose of classification, of a scheme that seeks to compromise uncertain claims. We make three points. First, the authorities cited by UTSS do not support this proposition. Second, any adjudication mechanism would not be fit for purpose in assessing the claims of the Potential Secured Creditors given the factual and legal complexities of the claims. Third, UTSS’s submission here makes the same erroneous assumption as its argument on the appropriate comparator, namely, that the Scheme seeks to compromise security rights as opposed to claims to security rights. The third point has already been addressed above. We consider the first and second points below.
[100] We start by observing that UTSS’s argument is counterintuitive. UTSS accepts that schemes can be used to compromise uncertain claims. But it contends that is only permissible if the claims are first adjudicated for the purpose of classification, which would then make the claims no longer uncertain. This is self-contradictory. Unsurprisingly, the authorities it has cited, Re Hawk Insurance and Re T&N, do not stand for the proposition that a scheme of arrangement that seeks to compromise uncertain claims must include an adjudication mechanism for the determination of those claims for the purpose of classification. The “adjudication mechanism” referred to in these cases relate to the mechanism for the adjudication of the valuation of the creditors’ claims for dividend distribution and not for the adjudication of the creditors’ rights against the applicant company for the purpose of classification. The question of whether a rights adjudication mechanism providing for the summary determination of the scheme creditors’ claims is necessary was therefore not in issue in either case. Neither case goes so far as to posit that schemes of arrangement, which seek to compromise contingent or uncertain claims, must contain a mechanism for the determination of rights for the purpose of assessing whether the creditors have been appropriately classified.
[101] The scheme of arrangement in Re Hawk Insurance provided for the creditors of the applicant company to be paid a proportion of their valid claims against the company, after accounting for any applicable set-off. Some of the scheme creditors’ claims arose from insurance or re-insurance contracts which could fall within one of three classes – unsettled paid claims, outstanding losses and incurred but not reported (“IBNR”) losses. The scheme provided that the value of the claims, absent an agreement between the claimant and the joint scheme administrators, would be determined by a scheme adjudicator in accordance with the dispute resolution procedure stipulated in the scheme. The scheme consideration was to be paid to the scheme creditors by way of dividend on the amounts of their admitted claims, but in the case of admitted claims arising out of insurance and re-insurance contracts, subject to a dividend weighting mechanism in accordance with a formula set out in the scheme (Re Hawk Insurance at [35]). The weighting mechanism provided that for the unsettled paid claims, outstanding losses and IBNR losses, only a proportion of the valued claim would be paid out in the form of dividends. The main issue in that case was whether the dividend weighting mechanism fractured the class of creditors with insurance or re-insurance contracts, such that the creditors with unsettled paid claims on the one hand and creditors with outstanding or IBNR losses on the other should be placed in separate classes.
[102] It is clear that the issue in Re Hawk Insurance was over the valuation of the claims of creditors with outstanding or IBNR losses. There was no dispute over whether the creditors had rights against the company and the nature of those rights. The scheme there was not about compromising claims to rights by potential creditors, unlike the present case where the crux of the dispute is over whether the Potential Secured Creditors have valid claims to security rights and the priority that they confer. The valuation and/or weighting mechanism in Re Hawk Insurance was therefore predominantly concerned with the adjudication of claims for the purpose of valuation for dividend distribution and not for the purpose of classification. In any case, the court in Re Hawk Insurance also did not appear to find that the valuation mechanism was either a necessary or relevant condition in granting sanction of the scheme. Instead, the point made in that case was that the weighting provisions, which merely reflected the need for a just estimate of the value of the claims, did not reflect any differences in the creditors’ rights, such that separate classes were warranted (see Re Hawk Insurance at [50]).
[104] We are therefore unable to accept UTSS’s submission that an adjudication mechanism for the purpose of classification is a necessary component of a scheme of arrangement which seeks to compromise uncertain and/or undetermined rights.
[105] We turn to the question of whether the adjudication mechanism is feasible in the present case. The decision in Noble Group (No 2) is instructive. In that case, the court considered the adequacy of the mechanism for the summary adjudication of the scheme creditors’ rights under the third Oriental Insurance requirement. In the case of disputed claims, the scheme provided for a claim determination and adjudication procedure whereby the scheme administrators would first assess the submitted claims in a manner similar to the admission of proofs of debt in a winding up. If the claims were rejected in whole or in part, and no agreement could be reached with the creditor in question, the creditor had the option of referring their claim to an independent adjudicator, who would be either a retired Court of Appeal judge or a nominated Queen’s Counsel (see Re Noble Group Ltd (No 1) [2019] 2 BCLC 505 (“Noble Group (No 1)”) at [8]–[9]). The English High Court observed that while it may be “entirely legitimate” for a scheme to restrict the access of creditors to the courts through the use of an independent adjudicator, where the creditors’ rights of recourse to the court were removed or restricted by virtue of a scheme, it was of heightened importance that the substitute for legal recourse in the courts be “robust, satisfactory and justified” (Noble Group (No 2) at [74], referring to Re Pan Atlantic Insurance Co Ltd [2003] 2 BCLC 678 at [33] and Re Lehman Brothers International (Europe) [2018] EWHC 1980 (Ch) (“Lehman Brothers”) at [158]). On the facts of the case, the court held that the adjudication process was fair (Noble Group (No 2) at [75]–[76]). Although the analysis in Noble Group (No 2) was in the context of considering the fairness of the scheme, the inquiry of whether an adjudication mechanism is sufficiently robust, satisfactory or justified is equally applicable to the present context.
[106] The question therefore is whether any adjudication mechanism would be robust, satisfactory or justified in the present case. As a starting point, any adjudication mechanism in a scheme of arrangement will necessarily involve a summary determination of the scheme creditors’ rights. The respondents submit that the Potential Secured Creditors’ claims to security in terms of validity and priority are heavily disputed and involve factually and legally complex issues. UTSS did not seriously contest the submission, resting its position on the need for an adjudication mechanism even if the claims were as characterised by the respondents. We agree with the respondents that the Potential Secured Creditors claims are the subject of heavy contest and raise legal and factual issues of some complexity. The validity of the Financing Banks’ security rights is the subject of SUM 4108. That involves an assessment of whether the import and inventory financing transactions were capable of creating a security interest in favour of the Financing Banks by way of a “pledge by attornment”, and whether a “pledge by attornment” must be registered as a charge under s 131(3)(d) of the Companies Act for it to be enforceable. SUM 4108 is to be heard with the UTSS Interpleader as there are overlapping issues. The validity of UTSS’s security right is in issue in both SUM 1003 and the UTSS Interpleader. Both proceedings are fraught with complexity. As to SUM 1003, questions arise on whether UTSS’s claims for the Termination Sum and Storage Fees, and any lien arising therefrom, contravene the pari passu principle of distribution and/or the anti-deprivation rule. The UTSS Interpleader is itself protracted and heavily contested, as multiple parties assert ownership over the oil products stored in the UTSS Disputed Tanks. Further, allegations of UTSS’s complicity in the alleged fraud of Hin Leong and its former directors, if established, raise questions over the validity of UTSS’s security interest (see below at [115]).
[107] It is evident that a summary process is wholly unsuitable to resolving such claims in a robust and satisfactory manner. An attempt to summarily adjudicate the claims of the Potential Secured Creditors would impose an almost impossible burden on adjudicators to arrive at a robust, satisfactory and defensible conclusion. The consideration here is similar to the exercise of discretion to grant leave to commence or proceed with litigation or arbitration where a moratorium is in place. In both situations, the question is whether an adjudication framework is fit for purpose given the complexity of the claim (both factually and legally) (see Sapura Fabrication Sdn Bhd and others v GAS and another appeal [2025] SGCA 13 at [69]; Kyen Resources Pte Ltd (in compulsory liquidation) and others v Feima International (Hongkong) Ltd (in liquidation) and another matter [2024] 1 SLR 266 at [52]–[53]; and Wang Aifeng v Sunmax Global Capital Fund 1 Pte Ltd and another [2023] 3 SLR 1604 at [25(a)]).
[108] We make a final observation. If UTSS’s argument on the necessity for an adjudication mechanism is correct, but such a mechanism is not feasible, Hin Leong will not be able to effect a scheme of arrangement for the distribution of the Uninjuncted Proceeds. The only option would be to have the rights of the Potential Secured Creditors determined in the Interpleader Proceedings and related applications. This is an untenable view, which goes against the foundational belief that creditors should have the liberty to agree to accept something different from their strict rights (see, eg, Ian Fletcher et al, Corporate Administrations and Rescue Procedures (LexisNexis, 2nd Ed, 2004) ("Fletcher") at para 13.15).
[109] We therefore agree with the Judge that the appropriate comparator is the situation where the Potential Secured Creditors’ claims are allowed to proceed to their full and final determination in the Interpleader Proceedings and related applications, with the ensuing issues of time, expenses and uncertainty of outcome. It is neither necessary nor appropriate for the claims of the Potential Secured Creditors to be adjudicated for the purpose of classification.
The relative positions of the creditors in the appropriate comparator and under the Scheme
[110] We turn to consider the relative positions of the Potential Secured Creditors under the Scheme and in the appropriate comparator. If the positions mirror each other, classifying the Potential Secured Creditors in one class is appropriate. In our view, the relative positions mirror each other.

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A creditors' scheme's disclosure to creditors about the money available was enough

Grounds of decision

Introduction

Facts

Disputes over the oil purportedly owned by Hin Leong

The proposed scheme of arrangement

The decision below

The parties’ cases on appeal

The appellant’s case

The respondents’ case

Issues to be determined

The scheme of arrangement regime

Whether the court should consider UTSS’s classification objections at the sanction hearing

The consequence of not raising the classification objections earlier

Whether UTSS had a good reason for not raising its objections earlier

Whether the Scheme should be sanctioned

Whether the classification of creditors under the Scheme was appropriate

The law on classification

The appropriate comparator

The relative positions of the creditors in the appropriate comparator and under the Scheme