Re oCap Management Pte Ltd (in liquidation) [2023] SGHC 316

This application is made by the AG under s 29(2)(b) of the Mutual Assistance in Criminal Matters Act 2000 (2020 Rev Ed) (“MACMA”), which governs requests for the enforcement of a foreign confiscation order that may be made in judicial proceedings in another country. Pursuant to a request for assistance from the Federal Republic of Germany (“the German authorities”), the AG primarily seeks an order (“the Restraint Order”) that oCap Management Pte Ltd (“the Company”) and Citibank NA (“Citibank”) be restrained, until further order, whether by themselves, their servants, agents or otherwise howsoever from disposing of, transferring, assigning, pledging, distributing, charging, diminishing the value of or otherwise dealing with their interest, in all or any part of the monies deposited with Citibank in two bank accounts (collectively, “the Bank Accounts”). The AG seeks to restrain up to €210m, which represents the value of the proceeds of criminal offences involving Wirecard AG and its subsidiaries (collectively, “the Wirecard Group”).

Complicating this matter is the fact that the Company is in liquidation. While the liquidators of the Company (“the Liquidators”), who are non-parties to this application, do not oppose the order that the AG is seeking, their position is that the Restraint Order should be made with appropriate conditions and exceptions to allow the Liquidators to deal with a portion of the moneys in the Bank Accounts, in the amount of no less than S$2,705,000 so as to not: (a) inhibit the Liquidators from exercising their functions for the purpose of distributing any property to the Company’s creditors; and/or (b) prevent the payment out of any property of expenses properly incurred in the winding up in respect of the Bank Accounts.

While the AG and the Liquidators do not dispute that the statutory requirements for the grant of the Restraint Order have been met, they take differing positions in relation to the principles that should govern the scope of any resulting order. As such, I indicated during the hearing that I will first rule on the applicable principles, with parties to make further submissions on the amount in the Bank Accounts with which the Liquidators should be allowed to deal; that amount would fall outside the scope of the Restraint Order. This judgment sets out those principles.

Background: The Wirecard Fraud

The genesis of this application relates back to the criminal offences involving the Wirecard Group. On 28 August 2020, the Local Court of Munich ordered the provisional seizure and attachment of the Company’s assets up to €100m as there were reasons to believe that the Company had obtained at least that sum as proceeds from alleged criminal offences involving the Wirecard Group, and the conditions for the confiscation of the value of the proceeds of crime under German law had been fulfilled.

In October 2020, the German authorities submitted a request to the AG pursuant to the MACMA seeking Singapore’s assistance to restrain the dealing in any of the moneys in the Bank Accounts, up to €100m. Subsequently, the German authorities ascertained that the proceeds of crime obtained by the Company amounted to the higher sum of €210m and accordingly clarified that their request seeks Singapore’s assistance to restrain the dealings in any of the moneys in the Bank Accounts up to €210m.

On 10 March 2022, the German authorities instituted criminal proceedings against Oliver Bellenhaus, Dr Markus Braun, and Stephan Egilmar Hartmann Freiherr von Erffa in Germany for alleged criminal offences committed involving the Wirecard Group between 2015 and 2020. In particular, Braun was charged with offences of embezzlement through loans amounting to €210m from and/or through the companies in the Wirecard Group to the Company in relation to the Wirecard Group’s purported dealings in the third-party acquirer and the merchant cash advance lines of businesses, which in truth did not exist. These non-existent businesses were instead used to disguise the Wirecard Group’s true financial position and ultimately divert moneys out of the Wirecard Group via the Company. Among other things, the German authorities are seeking an order for confiscation against the Company for the value of the proceeds of crime obtained by the Company amounting to €210m (“the German Confiscation Proceedings”).

On 18 April 2023, this originating application was filed on a without notice basis under the MACMA. The Attorney-General Chambers (“AGC”) notified the Liquidators’ solicitors, BlackOak LLC, of this application as a matter of courtesy. Following the Liquidators’ request, the AGC indicated that it would be prepared to proceed with this application on a with notice basis as requested by the Liquidators, provided that the Company and the Liquidators agreed to certain conditions. This was to manage the risk that the moneys in the Bank Accounts may be dissipated pending the disposal of this application. Parties eventually agreed on those conditions, and this application was thus heard on a with notice basis on 13 July 2023.

The statutory requirements for the grant of the Restraint Order have been met

I allow the application, being satisfied that all the statutory requirements for the granting of the Restraint Order have been met. Section 29(2)(b) of the MACMA, on which this application was based, read with s 29(1)(b), provides as follows:

Section 29 of the MACMA refers to the Third Schedule of the same Act (“Third Schedule”), to which I now turn. In this regard, paragraph 6 of the Third Schedule sets out four main legal requirements for the grant of a restraint order (see the Court of Appeal decision of Steep Rise Ltd v Attorney General [2020] 1 SLR 872 at [35]). For ease of reference, I set out paragraph 6:

As the AG correctly submits, the above requirements as distilled mean that the court must be satisfied that:

On the first requirement, judicial proceedings have been instituted in the Federal Republic of Germany. While it is not a “prescribed foreign country” as declared by the Minister under ss 2(1) and 17 of the MACMA, any assistance under Division 5 of the MACMA (of which s 29 is part) may still be provided to a foreign country if the appropriate authority of that country has given an undertaking to the AG that that country will comply with a future request by Singapore to that country for similar assistance in a criminal matter involving an offence that corresponds to the foreign offence for which assistance is sought (see s 16(2) of the MACMA). The AG has provided the requisite undertaking from the German authorities, with which I am satisfied.

The second requirement, that judicial proceedings have not concluded, has also been confirmed by the German authorities.

Turning to the third requirement, I am satisfied that there are reasons to believe that a foreign confiscation order will be made in the German Confiscation Proceedings. Section 2(1) of the MACMA defines a “foreign confiscation order” as follows:

In this regard, the German authorities have issued a certificate dated 1 September 2022 confirming that the German confiscating proceedings have been instituted against Bellenhaus, Braun, and von Erffa (as mentioned at [7] above), and that the purpose of these proceedings is to prosecute them for offences under German law and to confiscate the proceeds of crime, or the value of the proceeds of crime, derived from the commission of the offences. These include assets of the Company in the amount of €210m, including the Bank Accounts.

Fourth, I find nothing to suggest that it would be contrary to the public interest for the Restraint Order to be made. Indeed, the Liquidators also confirm that they are not aware of any evidence which suggests that the statutory requirements under the MACMA have not been fulfilled.

The scope of restrictions on the making of the Restraint Order

However, even when the statutory requirements under the MACMA are satisfied, the court’s power to grant a restraint order is subject to some restrictions, depending on the facts of each case. One such restriction is found in paragraph 14 of the Third Schedule, which governs the interaction between the court’s power to grant a restraint order on one hand, and the liquidation of a company on the other. Broadly speaking, there are two situations contemplated in paragraph 14. The first situation is where a restraint order is granted before the winding up of a company, and this is governed by paragraph 14(1). The second situation is governed by paragraph 14(2) and is concerned with an application for a restraint order that is heard after the company has been wound up.

As the Company was already in liquidation at the time of the hearing of this application, it is paragraph 14(2) that is applicable here. However, the AG and the Liquidators disagree about the proper interpretation of this provision. Paragraph 14(2) reads:

Paragraph 14(5) of the Third Schedule makes clear that the “company” referred to above means “any company which may be wound up under the Insolvency, Restructuring and Dissolution Act 2018” (“IRDA”). As the Company is being wound up under the IRDA, it is therefore undisputed that paragraph 14(2) is applicable here. The question, rather, is how paragraphs 14(2)(a) and 14(2)(b) should be interpreted.

Paragraph 14(2)(a) of the Third Schedule

The AG’s arguments

The AG first notes, in relation to paragraph 14(2)(a), that this provision concerns the distribution of realisable property to be made to a company’s creditors. It therefore applies when the grant of a restraint order over realisable property held by a company in liquidation will: (a) inhibit the liquidator in exercising his functions; and (b) those functions are being exercised specifically “for the purpose of distributing any property held by the company to the company’s creditors”.

The AG’s position is that paragraph 14(2)(a) only limits the court’s power to grant a restraint order over realisable property when the liquidator is specifically seeking to make an actual distribution to a company’s creditors. The AG submits that this interpretation is “logical, workable, and wholly in line with the statutory language” of paragraph 14(2)(a), which focuses solely on the distributive function of this provision, and limits its scope to when there is actual property to be distributed to creditors.

In support of its proposed interpretation, the AG makes several arguments. First, the AG says that construing paragraph 14(2)(a) narrowly would remove the uncertainty of possible speculation on the court’s part as to whether, and how much, realisable property must be given to the company’s liquidator so as to facilitate a possible eventual distribution of property to the company’s creditors.

Second, it is contended that the general purpose of restraint orders under the MACMA is to preserve assets in Singapore that may be the subject of a foreign confiscation order so that, when the said order is made, assets would still be available to satisfy it. This is a facet of the MACMA’s overarching aim of facilitating the provision of international assistance to other countries in criminal matters and obtaining reciprocal international assistance.

Third, the AG submits that the specific purpose of paragraph 14(2)(a) is to strike a balance between the domestic insolvency regime and the MACMA regime, where the same realisable property is the subject of both. The AG further argues that only the proposed interpretation would result in this specific purpose being coherent with the general purpose of the MACMA.

The Liquidators’ arguments

The Liquidators, on the other hand, contend that the MACMA framework operates on the rule that the “first in time prevails”. They argue that whether the insolvency legislation or the MAMCA take priority depends on whether orders are made under the MACMA before or after a winding up order is made.

The Liquidators rely on the English Court of Appeal decision of In re Stanford International Bank Ltd and another [2010] 3 WLR 941 (“In re Stanford”) interpreting ss 41 and 426 of the Proceeds of Crime Act 2002 (c 29) (UK) (“POCA”), which are provisions materially similar to paragraphs 7 and 14 of the Third Schedule. They submit that, notwithstanding that the POCA governs domestic confiscation and insolvency proceedings in the UK, the principles governing the interpretation of ss 41 and 426 of the POCA should nevertheless be followed in the interpretation of paragraphs 7 and 14 of the Third Schedule.

It is also argued on behalf of the Liquidators that the “first in time prevails” rule provides a practical solution in resolving two sets of legislation operating simultaneously against the same property, and that the parliamentary debates in the UK support their interpretation. In the round, the Liquidators submit that the “first in time prevails” rule represents the right balance to be struck between the competing interests of the public and of the creditors of the insolvent company.

The proper interpretation of paragraph 14(2)(a)

I do not agree with either interpretation of paragraph 14(2)(a) that each side has put forward. The first in time does not prevail, but neither should this provision be interpreted as narrowly as the AG contends.

In Tan Cheng Bock v Attorney-General [2017] 2 SLR 850 (“Tan Cheng Bock") at [37], a three-step framework for interpreting a statutory provision was laid down as follows, requiring a court to:

Applying the first step of the framework, while it is clear that paragraph 14(2)(a) accords primacy to the liquidation process in certain situations, there is indeed some ambiguity as to when that provision applies. Specifically, what does it mean to “inhibit the liquidator from exercising those functions for the purpose of distributing any property held by the company”? As both the AG’s and the Liquidators’ arguments have highlighted, there are a few possible interpretations:

(a) a “first in time prevails” rule should apply. That is, whether the insolvency legislation or the MAMCA take priority depends on whether orders are made under the MACMA before or after a winding up order is made;

(b) paragraph 14(2)(a) only limits the extent of the court’s power to grant a restraint order over realisable property when the liquidator is specifically seeking to make an actual distribution to a company’s creditors; or

(c) paragraph 14(2)(a) extends to all intended action(s) of the liquidator that are directed towards the eventual goal of distributing property to the company’s creditors. This would include any investigative work undertaken by the liquidator, the commencement of claims to potentially recover moneys owed/due to the company, and other functions of the liquidator, so long as there is some link between the liquidator’s intended action(s) and the eventual goal of distribution.

With the different possible interpretations of paragraph 14(2)(a) in mind, I now turn to the second and third stages of the Tan Cheng Bock framework. It is important here to distinguish between the specific purpose underlying a particular provision and the general purpose or purposes underlying the statute as a whole or the relevant part of the statute (see Tan Cheng Bock at [40]). While the court generally presumes that any specific purpose does not go against the grain of the relevant general purpose, this is not to say that the specific purpose can never go against the grain of the general purpose (see Tan Cheng Bock at [41]). For instance, there will be situations that the specific purpose of a provision can be to delimit the range of circumstances to which the general rule and, indeed, the general purpose applies.

I find this case to be one of such situations. As the then Minister for Law Professor S Jayakumar said in the Second Reading of the Mutual Assistance in Criminal Matters Bill, the general purpose of the MACMA is to give effect to “Singapore’s commitment to be part of the wider international network of cooperation in combating crime on a global scale” (see Singapore Parliamentary Debates, Official Report (22 February 2000), vol 71 at col 980). Reinforcing this is the long title of the MACMA, which states that it is “[a]n Act to facilitate the provision and obtaining of international assistance in criminal matters”.

It is evident, however, that paragraph 14(2)(a) – and indeed paragraph 14(2) more generally – imposes limitations on the extent to which Singapore should render international assistance in criminal assistance. By providing that the power of the court to grant a restraint order under paragraph 7 of the Third Schedule “must not” be exercised when either paragraphs 14(2)(a) or 14(2)(b) are satisfied, paragraph 14(2) makes clear that primacy is given to the liquidation process in certain situations where a restraint order is sought over realisable property after the company has entered into liquidation. Indeed, the conclusion that paragraph 14(2)(a) limits the powers of the court is one which “emanate[s] from its words” (see Tan Cheng Bock at [44]). Accordingly, I agree with the AG’s submission that the specific purpose of paragraph 14(2) generally (ie, both paragraphs 14(2)(a) and 14(2)(b)) is not entirely coterminous with the general purpose of the MACMA; rather, it is to strike a balance between the domestic insolvency regime and the MACMA regime, where the same realisable property is the subject of both.

(1) A “first in time prevails” rule does not apply

With this specific purpose in mind, I turn to consider the competing interpretations. It is apt to first consider the Liquidators’ interpretation (at [28(a)] above), as their position is that the “first in time prevails” rule is broadly applicable across both paragraphs 14(2)(a) and 14(2)(b). There is thus the possibility that their interpretation might be dispositive of the entire application, rendering all other issues moot. However, having considered the matter, I am of the view that this interpretation should be rejected.

As mentioned above, the Liquidators rely on the English Court of Appeal decision of In re Stanford in support of this interpretation and, in particular, the speeches of Arden LJ at [129] and Hughes LJ at [181]. I however did not consider that these assisted the Liquidators. Arden LJ had stated in obiter that the policy of the POCA “prevent[s] a defendant using an insolvency proceeding commenced after a restraint order as a means of defeating a restraint order” [emphasis in original]. However, as against the Liquidators’ interpretation, it was clear that Arden LJ also went on, in the same paragraph, to say that there is “no mention of extending this policy to insolvency proceedings commenced before a restraint order is made” [emphasis in original]. Indeed, she observed that the explanatory notes to the POCA make clear that, in situations where there is a prior insolvency proceeding, there are circumstances when the insolvency proceeding has priority over the public interest in restraint and confiscation. As such, in the present application where there has been a prior insolvency proceeding, I do not think that Arden LJ’s statements indicate that a “first in time prevails” rule would apply even if In re Stanford were followed.

Importantly, it even appears that Hughes LJ had some reservations about the “first in time prevails” approach as it would enable a dishonest defendant to evade the prospect of a confiscation order by conniving to have an insolvency order made before there could be a restraint order, and the potential for that to be done with a view to preserving assets for persons claiming to be creditors but linked in some manner to the defendant would be considerable. This might result in “unseemly races between insolvency practitioners and prosecutors”. Nevertheless, the learned Lord Justice ultimately concluded that he did not have to decide on this question on the facts of that case. As such, given the obiter nature of the aforesaid statements in In re Stanford and the clear difficulties in adopting Arden LJ’s approach, I do not think that these statements represent any definitive position in English law.

Even if English law adopts a “first in time prevails” rule, I do not think that this position can be directly transposed onto Singapore law. On the contrary, the starting point is that primacy must be given to the text of the provision and its statutory context (see Tan Cheng Bock at [43]). When deciding whether any extraneous material should be referred to and/or what weight should be given to such material, consideration must be given to the desirability of persons being able to rely on the ordinary meaning conveyed by the text and to the need to avoid prolonging legal proceedings (see Tan Cheng Bock at [45]). It is also obvious that, while foreign decisions may be of persuasive value, they are not binding on Singapore courts. Similarly, while the Liquidators have sought to rely on the parliamentary debates in the UK, I do not give much weight to those materials in the absence of any indication that our Parliament had considered them. Ultimately, fidelity must be had to the text and context of the statutory provision.

In the present application, while I have concluded that the “first in time prevails” rule is a possible interpretation, it does add an extra gloss to the wording of paragraph 14(2)(a) which is unsupported by the plain words of the statute. This all-or-nothing approach does not cohere with the specific purpose of paragraph 14(2) to strike a balance between the two regimes. On the contrary, it leaves the outcome of any case to whether the company had fortuitously entered into a winding up before the hearing of the restraint order. As Hughes LJ observed, the potential upshot of this approach is that there might be “unseemly races between insolvency practitioners and prosecutors” (see In re Stanford at [181]). On this basis, I do not think that the Liquidators’ interpretation of paragraph 14(2)(a) is correct.

(2) The court’s power to grant a restraint order is not limited to cases where distribution to the creditors is imminent

I also reject the AG’s proposed interpretation (at [28(b)] above) as being unduly underinclusive since it only restricts the court’s power to grant a restraint order in the scenario where the liquidator is specifically seeking to make an actual distribution to the company’s creditors. The result is that the only scenario where the court’s power to grant a restraint order is limited is where the liquidation is at such an advanced stage that distribution would be imminent. Conversely, where distribution is not imminent, the court’s power to grant a restraint order is not restricted by the consideration that without access to any funds, the liquidator would not be able to realise the property of the company in order to carry out her other functions, such as appointing a solicitor to assist in her duties, or bringing or defending any action or legal proceeding in the name and on behalf of the company (see s 144(1)(f) of the IRDA).

The AG’s interpretation does not align with the text, context, and purpose of paragraph 14(2)(a). First, as regards the text and context of this provision, it bears emphasis that paragraph 14(2)(a) contains the words “inhibit the liquidator from exercising those functions for the purpose of distributing any property” [emphasis added], which is not necessarily coterminous with inhibiting the liquidator from the act of distribution. Indeed, as an anterior act can be done “for the purpose of” performing a subsequent act, it stands to reason that the liquidator can exercise other functions prior to distribution but which ultimately serve the purpose of distribution. Applying this reasoning, I do not think that the wording of this provision necessarily suggests that the court’s power to grant a restraint order is only restricted to situations where granting a restraint order would inhibit the liquidator from the imminent act of distribution. Had the legislature intended to limit it in the way argued for by the AG, other language would have been used.

Second, the AG’s interpretation would also be inconsistent with the specific purpose of paragraph 14(2) to strike a balance between the winding up regime under the IRDA and the MACMA regime. It would effectively allow the MACMA regime to take precedence over the winding up regime in most situations, except when the liquidation process is almost complete. In my view, this unduly skews the balance in favour of the MACMA regime, resulting in an extreme outcome which must not have been intended by Parliament. More fundamentally, this interpretation would render otiose the qualifying words “for the purpose of” that are situated immediately before the mention of “distributing any property”, which, when read together, encompass anterior acts prior to distribution but which are done with the end of distribution in mind. This is tantamount to an impermissible rewriting of paragraph 14(2)(a), contrary to the principle that the court should endeavour to give significance to every word in an enactment (see Tan Cheng Bock at [38]).

(3) The appropriate balance to be struck

Having considered the different interpretations, I am of the view that paragraph 14(2)(a) is not only applicable where granting a restraint order would inhibit the liquidator from performing the act of distribution itself, but also where it would inhibit the liquidator from performing other functions which serve the ultimate end of distribution.

I note, preliminarily, that the phrase “distributing any property” in paragraph 14(2)(a) is not entirely apposite; a liquidator does not, strictly speaking, distribute property directly. In a winding up, the liquidator takes in the property of the company, and sells off (or “liquidates”) the assets of the company, among other things, to bring in funds for distribution to the various creditors, leaving any balance to the shareholders. Therefore, the phrase “distributing any property” in paragraph 14(2)(a) must be taken to refer, more generally, to the distribution of funds derived from the liquidated assets of the company to its creditors. From this, it is clear that paragraph 14(2)(a) limits the court’s power to grant a restraint order where it would inhibit the liquidator from making the actual distribution of funds from assets which have been liquidated.

The question, however, is whether paragraph 14(2)(a) goes further in restricting the court’s power to grant a restraint order in other circumstances. This is because the reference to the act of “distributing any property” does not stand in isolation; indeed, paragraph 14(2)(a) makes reference to the liquidator “exercising those functions for the purpose of distributing any property held by the company to the company’s creditors” [emphasis added]. As explained above at [38]–[39], the phrase “for the purpose of” appears to extend the scope of paragraph 14(2)(a) to other functions exercised by the liquidator prior to distribution but which ultimately serve the purpose of distribution.

In my view, this broader interpretation must be correct as it is clearly consistent with the broad and wide-ranging functions of a liquidator conducting the winding up of a company. For instance, a liquidator may be required to, among other functions, compromise any debt due to the company; sell the immovable and movable property of the company; do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents; appoint an agent to do any business which the liquidator is unable to do himself or herself; and do all such other things as are necessary for winding up the affairs of the company and distributing its assets (see s 144(2) of the IRDA). Paragraph 14(2)(a) must therefore be taken to cover the entire liquidation process, at least up to the point of completion of distribution to the creditors (although, presumably, the distribution of any balance to the shareholders may fall outside the ambit of this paragraph). Accordingly, even if a restraint order is granted, the process of the liquidation would still continue; the liquidation process should not be allowed to be stymied indefinitely pending a foreign confiscation order. To my mind, this strikes the appropriate balance between the winding up regime and the MACMA regime as intended by Parliament.

The AG raises four objections against this interpretation, which I now address.

Second, I reject the AG’s contention that this interpretation is unworkable in practice as the court is not apprised of the full facts and circumstances of the company’s liquidation and is thus not in any meaningful position to adjudicate on any claims as to whether (and how much) realisable property must be given to the company’s liquidator.

This supposed problem is not insurmountable. At the time when the application for the restraint order is heard it is not necessary for the liquidator and the court to predict, with full certainty and precision, the future expenses that will be incurred. Given that the court has power to vary or discharge the restraint order (see paragraph 7(5) of the Third Schedule to the MACMA), it is always open for the court to assess the immediate expenses that are required for the foreseeable future. Provided that the requirements in paragraph 14 of the Third Schedule are met, a liquidator may subsequently apply to court to vary the restraint order to show that the restraint order against some of the restrained property needs to be lifted in order for the liquidator to perform his functions.

Third, notwithstanding the AG’s argument to the contrary, I do not think that this interpretation renders paragraph 14(2)(b) of the Third Schedule nugatory. In this regard, the AG submits that this interpretation would encompass all liquidation expenses, which the AG says is a matter that is properly the subject of paragraph 14(2)(b). While it is true that paragraphs 14(2)(a) and 14(2)(b) would both relate to liquidation expenses, the function of the two rules are different. While paragraph 14(2)(b) concerns the “payment out” of liquidation expenses, it presupposes that the company has sufficient assets from which to pay out to begin with. To ensure that this is so, the court’s power to restrain the property of the company which could potentially be paid out as liquidation expenses must accordingly be circumscribed as well. If the company has insufficient unrestrained assets to begin with, it is unlikely that any liquidator would continue with her services if it were clear that she would not be reimbursed from the company’s assets. Therefore, a liquidator would require assurance that she would be actually paid for her expenses, and paragraph 14(2)(a) serves precisely this function by restricting the court’s power to grant a restraint order over property that should be reserved as liquidation expenses, that would be paid out in the future. This function can only be served by the adoption of this interpretation, where there is a complete coincidence between the types of expenses that are covered by paragraphs 14(2)(a) and 14(2)(b). As such, instead of rendering paragraph 14(2)(b) nugatory, this interpretation of paragraph 14(2)(a) complements paragraph 14(2)(b) and ensures that the latter can be given proper effect.

Lastly, the AG argues that this interpretation should be rejected on the basis that that it is at odds with paragraph 14(3) of the Third Schedule, which expressly stipulates that “[n]othing in the Insolvency, Restructuring and Dissolution Act 2018 is taken as restricting, or enabling the restriction of, the exercise of those powers mentioned in [paragraph 14(2)]”. The AG says that this means that Parliament could not have intended for paragraph 14(2) to be construed so expansively. I disagree. While it is stipulated that the provisions in IRDA do not restrict the court’s power to grant a restraint order, that stipulation does not lead to any conclusion how the exceptions in MACMA, such as paragraph 14(2), should be construed.

Accordingly, I am of the view that paragraph 14(2)(a) of the Third Schedule should be read broadly to limit the court’s power to grant a restraint order over realisable property where it would inhibit the liquidator from performing the act of distribution to the company’s creditors, as well as other functions which would serve that ultimate purpose.

Paragraph 14(2)(b) of the Third Schedule

I now consider the proper interpretation of paragraph 14(2)(b) of the Third Schedule, which limits the court’s power to grant a restraint order over realisable property held by the company in relation to which the functions of the liquidator are exercisable “so as to prevent the payment out of any property of expenses (including the remuneration of the liquidator or any provisional liquidator) properly incurred in the winding up in respect of the property”.

The AG’s arguments

The AG argues that the use of the word “incurred”, by its plain meaning and past tense, imposes a requirement that the reimbursement of expenses must be retrospective, rather than prospective. Such expenses must have already been incurred, the AG contends, relying on the decision of the General Division of the High Court (“the General Division”) in Carlos Manuel De São Vincente v Public Prosecutor [2023] SGHC 143 (“Carlos”) at [29] which, in the context of domestic restraint orders, interpreted s 35(8)(b)(i) of the Criminal Procedure Code 2010 (2020 Rev Ed) (“Criminal Procedure Code”). As such, the AG says that the court is only entitled to consider expenses incurred before the making of a restraint order in deciding the extent to which paragraph 14(2)(b) limits the court’s power to make that order.

Furthermore, it is argued that the Liquidators must prove to the satisfaction of the court that the expenses had been properly incurred in order for paragraph 14(2)(b) to be engaged. The AG also argues that a liquidator can only prove that expenses have been “properly” incurred after it has been incurred; and thus, it is argued that this further supports the AG’s interpretation that the reimbursement of expenses must be retrospective, rather than prospective.

Furthermore, it was stressed by the AG during the hearing that these expenses must be incurred in the winding up “in respect of the property”, and not the winding up generally. It is argued that, if Parliament had intended for paragraph 14(2)(b) to include expenses incurred in the winding up generally, the words “in respect of the property” would not have been added to qualify the ambit of the provision.

Thus, in sum, the AG takes the position there are three elements to be satisfied under paragraph 14(2)(b): (a) that the expenses have already been incurred before the making of a restraint order; (b) that these expenses were proper; and (c) that these expenses were in respect of the realisable property.

The Liquidators’ arguments

The proper interpretation of paragraph 14(2)(b)

It will be recalled that paragraph 14(2)(b) limits the court’s power to grant a restraint order where it would “prevent the payment out of any property of expenses (including the remuneration of the liquidator or any provisional liquidator) properly incurred in the winding up in respect of the property”. Applying the first stage of the Tan Cheng Bock framework, I find that both the AG and the Liquidators have advanced possible interpretations of paragraph 14(2)(b).

In this regard, the AG has rightly argued that the use of the word “incurred” in this provision may suggest that the limitation on the court’s power to grant a restraint order must be in respect of expenses already incurred before the making of the restraint order. As for the Liquidators, they have also advanced a possible interpretation; since there is no express cut-off date in respect of the expenses which must be properly incurred, it is possible that the court may also consider, when granting a restraint order, future expenses that will be properly incurred after the hearing of the restraint order application.

Given these competing interpretations, it is necessary to proceed to the second and third stages of the framework in Tan Cheng Bock. As with my discussion on paragraph 14(2)(a), I observe that there are similarly some issues with the language used in paragraph 14(2)(b). As noted above (at [41]), the assets of a company are not distributed directly to the creditors but are instead pooled and liquidated so that the proceeds can be distributed (see, for eg, the General Division’s decision in Lim Siew Soo v Sembawang Engineers and Constructors Pte Ltd (in compulsory liquidation) (Metax Eco Solutions Pte Ltd, intervener) [2021] 4 SLR 556 at [119]).

(1) A liquidator is not restricted to claiming for expenses incurred before the restraint order is made

Nevertheless, it would seem clear that one specific purpose of paragraph 14(2)(b) is to reimburse a liquidator’s expense in carrying out her work and to remunerate her for the value brought about by her work. Assessed against this purpose, the AG’s interpretation would appear artificial. Given the tenor of paragraph 14(2)(b) to favour the payment of reimbursement to the liquidator for her expenses and to remunerate her for her work, it would be odd if the amount of remuneration she can claim is arbitrarily determined by the time at which a restraint order is made. Moreover, given my earlier conclusion that the liquidation process would still continue and not be stymied indefinitely even after the court grants a restraint order (at [43] above), it would be absurd to expect the liquidator to continue on with work even when she would not be paid for any work done, or reimbursed for her expenses incurred, after the making of the restraint order.

While the AG relies on the General Division’s decision of Carlos in support of its interpretation, I do not regard this case as being relevant for the purposes of this application. The case involved the interpretation of s 35(8)(b)(i) of the Criminal Procedure Code, which operates in a different context from the provisions under the MACMA. Even if the same word is used in two separate pieces of legislation, it does not always follow that they would carry the same meaning. The interpretation of a word would depend on the particular statutory context in question (see Tan Cheng Bock at [54(c)(ii)], and the meaning of the same word might vary in different contexts (see Hossain Rakib at [45]).

Thus, comparing s 35(8)(b)(i) of the Criminal Procedure Code with paragraph 14(2)(b) of the MACMA, it is evident that the word “incurred” is used in different contexts. In s 35(8)(b)(i) of the Criminal Procedure Code, the word “expenses incurred” is used in the context where property has already been seized, as can be seen below:

As s 35(8) of the Criminal Procedure Code governs the situation where property already seized is released for the purposes of reimbursement, and one must prove the sum to be reimbursed, the conclusion in Carlos that the “reimbursement of expenses be retrospective rather than prospective” (at [29]) is understandable. This is quite different from the context of the MACMA, where paragraph 14(2)(b) restricts the court’s power to grant a restraint order at the outset, and which possibly contemplates that any restraint order granted should not be scoped so widely in the first place where it would prevent the payment of future expenses properly incurred in the winding up in respect of the property.

In any event, there was no issue of the expenses allegedly incurred in Carlos being prospective; therefore, I do not think that the statement contained in that case was intended to conclusively set out a position of law in Singapore. Indeed, I do not think that Carlos is authority for the proposition that the expenses referred to in paragraph 14(2)(b) must be retrospective rather than prospective.

(2) A liquidator’s claim for proper expenses incurred throughout the liquidation is not affected by a restraint order

To give effect to the purpose of paragraph 14(2)(b), which is to reimburse a liquidator’s expense in carrying out her work and to remunerate her for the value brought about by her work, I am of the view that it should be read as restricting the court’s power to grant a restraint order over realisable property to which the functions are exercisable, if the following elements are satisfied:

I am more in agreement with the Liquidators’ interpretation of this provision.

(A) Expenses must have been, or will be incurred in the winding up

As regards the first element, by reading paragraph 14(2)(b) more broadly to include expenses that have not been incurred but which will be properly incurred in the liquidation of realisable property, liquidators would be provided with greater comfort in knowing that they would be reimbursed for their expenses, and for the value of their work. This is especially given the nature of liquidation: that of an ongoing process. It would be unfair to expect liquidators to carry on with the liquidation process on one hand, and on the other hand deny their claims for expenses incurred after a particular point in time, when it is entirely possible that the bulk of the liquidator’s work and expenses might only be incurred after that point. Thus, I am of the view that the protection accorded by paragraph 14(2)(b) to liquidators should not be read so restrictively to the extent that any protection would depend on the timing at which the restraint order application is brought. Instead, to give full effect to the protective aim of paragraph 14(2)(b), a restraint order must also not be granted in relation to expenses that will be properly incurred in the future. Ultimately, this goes back to the overarching purpose of paragraph 14(2), which is to strike a balance between the winding up regime under the IRDA and the MACMA regime (see [31] above). I am satisfied that this interpretation achieves that balance.

Returning to the context of the MACMA, a few non-exhaustive factors that a court might consider in assessing the projected future expenses of the liquidator include:

First, as paragraph 14(2)(b) is meant to provide reassurance that the liquidator’s expenses will be reimbursed and that her work would be remunerated, the anticipated work of the liquidator must inform the court’s assessment of the value of the company’s realisable property that is to be shielded against a restraint order. Nevertheless, the liquidator must show that such anticipated work is necessary. Indeed, the requirement of necessity lends expression to the balance that must be struck between the interest in not bringing the liquidation process to a complete halt, and the interest in facilitating the provision and obtaining of international assistance in criminal matters (see s 3 of the MACMA).

Second, the question of whether the liquidator has access to third-party funding informs the court’s assessment of what is necessary to keep the liquidation process afoot. If there is access to third-party funding, it follows that the value of the company’s realisable property that is to be shielded from a restraint order would be adjusted downwards. This is because the company would need to liquidate less of its own realisable property in order to pay for the expenses of the liquidation process.

(B) The incurring of such expenses must be proper

I now turn to the second element, which requires that the incurring of the aforesaid expenses must be proper. This applies to both past and future expenses. In relation to future expenses, it can be said that there is overlap between this element and the factors set out at [67]–[71] above which are relevant in the application of the first element. Nevertheless, the two elements are conceptually distinct. The first element relates to the quantum of expenses that will be incurred, while the second relates to whether such expenses are justified. It might however be unnecessary to consider these factors twice over in applying paragraph 14(2)(b), as the determination of what expenses are necessary in the future will inevitably involve an implicit consideration of whether such expenses are proper.

As for past expenses, the principles governing the remuneration and reimbursement of a liquidator would apply. In deciding on whether the claimed expenses are appropriate, factors to consider include: (a) the time spent by the liquidator on the matter; (b) the value brought to bear by the liquidator; (c) the reasonableness of the charge out rate; (d) the complexity of the matter; (e) the effectiveness of what was done; and (f) the functions and responsibilities of the liquidator (see the High Court decision of Re Econ Corp Ltd (in provisional liquidation) [2004] 2 SLR(R) 264 (“Re Econ”) at [45], [47], [50] to [60]). As aptly encapsulated by Steven Chong J (as he then was) in the High Court decision of Kao Chai-Chau Linda v Fong Wai Lyn Carolyn and others [2016] 1 SLR 21, the test for whether the claimed remuneration is proper is whether the sum is a fair, reasonable and proportionate reflection of the value of the services rendered. The expression “fair, reasonable and proportionate” should be read holistically: it means that the remuneration awarded should be commensurate with the nature, complexity and extent of the work undertaken (at [31] and [38]). I would also add that the standard that a liquidator has to meet in this inquiry should also be the same as that taken when the court decides whether reimbursement and remuneration should be granted to a liquidator in a typical scenario.

I also consider the procedure by which an application involving paragraph 14(2)(b) is to be conducted. While there was some discussion during the hearing about whether a taxation should always be ordered, I do not think that this is necessary. In this regard, I note that V K Rajah JC (as he then was) had opined in Re Econ at [70] that the “taxing master [ie, the Registrar] is in the best position to determine remuneration or at any rate in a better position than a judge”. The learned judge had referred to the statement of Hoffmann J (as he then was) in In re Potters Oils Ltd [1986] 1 WLR 201 at 207 that “the court is ill-equipped to conduct a detailed investigation of receivers’ charges on an itemised basis. A judge could not do so without being expensively educated by expert evidence”. While this may be true in many cases, I do not think that Rajah JC had intended to impose an absolute rule; indeed, the learned judge did not go so far to say that it is mandatory for the court to order taxation. Neither is such a requirement found in the IRDA or the Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring) Rules 2020.

Turning to another issue, I would also observe that, where a liquidator seeks to rely on paragraph 14(2)(b), it is insufficient for her to solely rely on the statutory grounds in the IRDA to justify her claim. She must still satisfy the court that the expenses claimed are proper, even if the grounds on which she relies do not typically require the court’s intervention. Such grounds are set out in ss 139(3)(a) and 139(3)(b) of the IRDA:

Summary of the applicable principles

I now summarise the applicable principles in an application under the MACMA involving paragraph 14(2) of the Third Schedule:

(a) paragraph 14(2)(a), which restricts the court’s power to grant a restraint order, is not only applicable where granting a restraint order would inhibit the liquidator from performing the act of distribution itself, but also where it would inhibit the liquidator from performing other functions which serve the ultimate end of distribution;

(b) paragraph 14(2)(b) restricts the court’s power to grant a restraint order over realisable property to which the functions are exercisable, if expenses were, or will be, incurred in the winding up in respect of the property (ie, in the liquidation of realisable property), and the incurring of such expenses was or would be proper;

(i) in relation to the first element, non-exhaustive factors that a court might consider in assessing the projected future expenses of the liquidator include: (A) the necessary anticipated work to be done for the remainder of the liquidation; (B) whether there is any access to third-party funding; and (C) whether the past expenses of the liquidator have been reasonable;

(ii) the second element applies to both past and future expenses. In relation to future expenses, it might be unnecessary to consider the second element separately from the first, as there is overlap. In relation to past expenses, the principles governing the remuneration and reimbursement of a liquidator would apply. Factors to consider include: (A) the time spent by the liquidator on the matter; (B) the value brought to bear by the liquidator; (C) the reasonableness of the charge out rate; (D) the complexity of the matter; (E) the effectiveness of what was done; and (F) the functions and responsibilities of the liquidator. The test for whether the claimed remuneration is proper is whether the sum is a fair, reasonable and proportionate reflection of the value of the services rendered, which must be assessed holistically.

(iii) the court may determine the expenses to be awarded to the liquidator without a taxation procedure; and

(iv) where a liquidator seeks to rely on paragraph 14(2)(b), it is insufficient for him to solely rely on the statutory grounds in the IRDA to justify his claim. He must still satisfy the court that the expenses claimed are proper, even if the grounds on which she relies do not typically require the court’s intervention.

Conclusion

In the premises, I am satisfied that the Restraint Order should be granted in principle as the statutory requirements for such grant have been fulfilled. Before the order is granted however, I will give directions on the filing of submissions specifically on the amount with which the Liquidators should be allowed to deal.