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Grounds publishedDecided 16 May 2024
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General Division of the High Court

Re Mingda Holding Pte Ltd and another matter

[2024] SGHC 130Case no. Companies Winding Up No 149 of 2022 (Summons No 125 of 2024)

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Grounds of decision

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  1. [1] The following applications arising out of the liquidation of Mingda Holding Pte Ltd (“Mingda”) are before me:

  2. (a) Firstly, HC/SUM 125/2024 (“SUM 125”), which is an application by the liquidator of Mingda (“the Liquidator”), Mr Jason Aleksander Kardachi, for the court’s authorisation:

  3. (i) to appoint Fullerton Law Chambers LLC (“FLC”) as the Liquidator’s solicitors with effect from 13 July 2023 to assist him with his duties and to bring actions in the name and on behalf of Mingda, pursuant to s 144(1)(f) of the Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed) (“IRDA”); and

  4. (ii) to enter into a creditor funding agreement (“the Funding Agreement”) with Amalgamated Metal Trading Ltd (“AMT”), so as to enable the Liquidator to bring actions in the name and on behalf of the company.

  5. (b) Secondly, HC/OA 26/2024 (“OA 26”), which is an application by AMT, to be given an advantage under s 204(3) of the IRDA in respect of the Funding Agreement between AMT and Mingda.

  6. [2] The applications are opposed by the following persons, being other creditors of Mingda:

  7. (a) Shanghai Ran Yu Lian Trading Co Ltd (“SRT”);

  8. (b) Orient Nickel Pte Ltd (“Orient”); and

  9. (c) Mr Yang Mingdong (“Mr Yang”);

  10. [3] Having considered the various parties’ arguments carefully, my decision on these applications is as follows:

  11. (a) I allow SUM 125 in part:

  12. (ii) The Liquidator is granted authorisation to enter into the Funding Agreement with AMT on the proposed terms.

  13. (b) I allow OA 26. I find the advantage sought by AMT to be fair and reasonable in the circumstances, and that sufficient safeguards have been proposed.

  14. Background to these applications

  15. Circumstances of Mingda’s insolvent liquidation

  16. [5] There are links between Mingda, Mr Yang and Orient. In addition to being a creditor of Mingda, Mr Yang was the sole director and shareholder of Mingda at the time of its entry into insolvent liquidation. On the other hand, Orient is a related creditor of Mingda, as various key personnel in Orient’s management are related to Mingda:

  17. (a) Mr Yang himself was a former director and shareholder of Orient up until 1 March 2022 and 28 April 2022 respectively;

  18. (b) Ms Chew Yi Lin, a current director of Orient, was Mingda’s former operations manager up until 31 May 2022;

  19. (c) Ms Rui Yinjuan, a current shareholder of Orient, is the wife of Mr Yang; and

  20. (d) Ms Joanna Tay Xiaoyu (“Ms Tay”) is the corporate secretary of both Mingda and Orient, as well as a former director of Mingda.

  21. [6] The Liquidator identified six transactions between Mingda and Orient prior to Mingda’s winding up that, in his assessment, constituted unfair preferences voidable under s 225 of the IRDA. On this basis, the Liquidator wrote to Orient demanding restitution in respect of these transactions. Orient refused as it took the position that these transactions were not unfair preferences.

  22. [8] Shortly after, the Liquidator called a meeting of Mingda’s creditors on 9 November 2022. At this meeting, the Liquidator informed the creditors of his preliminary findings in respect of the six transactions between Mingda and Orient (see [6] above). Further, to facilitate coordination of the liquidation between the creditors and the Liquidator, a three-member Committee of Inspection (“COI”), constituting the following persons, was formed:

  23. (a) Mr Stephen Dempsey (“Mr Dempsey”), as representative of AMT;

  24. (b) Ms Tay, as representative of Orient; and

  25. (c) Mr Sun Bin (“Mr Sun”), as representative of SRT.

  26. The Liquidator’s appointment of FLC as solicitors for Mingda

  27. [9] At the first meeting of the COI on the same day (viz, 9 November 2022), the Liquidator sought the COI’s approval to appoint solicitors to assist him with his duties, including the potential recovery of Mingda’s assets. However, this resolution failed to pass. Although Mr Dempsey voted in favour, Mr Sun voted against, while Ms Tay abstained.

  28. [10] Despite the COI’s refusal to grant authorisation to appoint solicitors, the Liquidator approached FLC with a view to taking out an application for the court’s authorisation for him to appoint FLC as solicitors to assist him in his duties, as well as to potentially represent Mingda in asset recovery actions against Orient and Mr Yang.

  29. [11] It is against this backdrop that SUM 125 has been brought by the Liquidator for the court’s authorisation of his appointment of FLC as his solicitors.

  30. The Funding Agreement between AMT and Mingda

  31. [12] Although the Liquidator intended to pursue the claims against Orient and Mr Yang, Mingda did not have sufficient funds for him to do so. As such, the Liquidator wrote to AMT and SRT to enquire if they were willing to provide the necessary funds for Mingda to prosecute these claims.

  32. [13] SRT did not extend any offer of funding. However, following discussions between the Liquidator and AMT, AMT expressed interest to provide funding to the Liquidator to pursue the claims against Orient and Mr Yang.

  33. [15] Prior to the hearing of SUM 125 and OA 26, the Liquidator and AMT had brought sealing applications seeking to redact certain terms of the Funding Agreement from the other creditors, including Orient, SRT and Mr Yang. After hearing submissions from the Liquidator and AMT, I was satisfied that the orders sought should be granted. Given this, only a redacted version of the Funding Agreement was served onto the other creditors, and in this judgment, no specific reference is made to the redacted terms.

  34. [16] For the purposes of the present applications, the material terms of the Funding Agreement can be briefly summarised as follows:

  35. (a) AMT agrees to provide an indemnity (limited to a redacted maximum amount) to the Liquidator for the latter’s pursuit of actions against Orient and Mr Yang (“the Indemnity”).

  36. (i) first, to pay AMT the total amount disbursed by AMT to the Liquidator under the Indemnity;

  37. (ii) second, to pay AMT’s “Funder’s Costs” (in broad terms, AMT’s reasonable legal fees and disbursements in connection with Mingda’s liquidation, the recovery of AMT’s debt from Mingda and the Liquidator’s pursuit of the actions against Mr Yang);

  38. (iii) third, to pay, on a pari passu basis:

  39. (A) the “Funder Creditor Amount” (in broad terms, the amount of debt adjudicated by the Liquidator to be owed to AMT); and

  40. (B) “JPM’s Costs” (in broad terms, costs incurred by JPM in relation to a previous indemnity it had granted to the Liquidator in investigating matters relating to Mingda’s claims against Orient and Mr Yang); and

  41. (iv) fourth, to pay the Liquidator’s costs and expenses in connection with Mingda’s liquidation; and

  42. (v) fifth, to pay any surplus to Mingda’s other creditors in accordance with the distribution scheme set out in the IRDA.

  43. [17] The Funding Agreement also contains a condition precedent that court approval under s 204 of the IRDA be obtained for the Recovered Assets to be distributed in accordance with the Distribution Waterfall. It is for this reason that AMT has brought OA 26 to seek such authorisation.

  44. Summary of parties’ positions

  45. [18] The outline of the parties’ general position on the applications is as follows:

  46. (a) the Liquidator’s applications in SUM 125 are opposed by Orient and Mr Yang; and

  47. (b) AMT’s application in OA 26 is opposed by all three objecting creditors (Orient, Mr Yang and SRT).

  48. Issues to be determined

  49. [19] The issues that arise for determination in the present case are as follows:

  50. (a) First, whether the court should authorise the Liquidator’s appointment of FLC in SUM 125, and if so, what the terms of this authorisation should be;

  51. (b) Second, whether the court should authorise the Liquidator to enter into the Funding Agreement with AMT in SUM 125; and

  52. (c) Third, whether the court should grant AMT an advantage in OA 26, and if so, what the terms of this advantage should be.

  53. The decision

  54. SUM 125: Whether the court should authorise the Liquidator’s appointment of FLC

  55. [20] The Liquidator’s application to appoint FLC as Mingda’s solicitors is brought under s 144(1)(f) of the IRDA, which states as follows:

  56. Given that s 144(1) allows the Liquidator the option of acting on the authority of either the COI or the court to appoint solicitors, the mere fact that the COI has previously decided not to grant its approval to the Liquidator (see [9] above) is not conclusive of the matter, as the court may nonetheless grant the Liquidator the necessary authorisation.

  57. [21] The Liquidator’s application is complicated by the fact that he does not merely seek prospective authorisation to appoint FLC but goes further to pray for the authorisation to be backdated to 13 July 2023. I should clarify at this juncture that, when SUM 125 was issued, the Liquidator did not initially seek retrospective authorisation. Instead, he subsequently changed his position and his counsel made an oral application at the hearing to amend his prayer to include the backdating element. I allowed the amendment subject to any contrary arguments by the objecting parties on the merits of the amended prayer.

  58. [22] In this regard, Orient and Mr Yang have taken issue with the Liquidator’s attempt at obtaining retrospective authorisation from the court to appoint FLC. In both their written and oral submissions, Orient and Mr Yang did not raise any real objection to the Liquidator’s application to the extent of the court’s authorisation only having prospective effect. Instead, their objections were limited to the court granting retrospective authorisation.

  59. [24] As it is the Liquidator’s request for retrospective authorisation that is the main point of contention between the parties, this requires me to consider whether the court has the power to do so under s 144(1)(f) of the IRDA. It is to this issue that I now turn.

  60. Whether the court can grant retrospective authorisation for a liquidator to appoint solicitors under s 144(1)(f) of the IRDA

  61. [25] At present, there are conflicting High Court authorities on whether s 144(1)(f) of the IRDA extends to allowing the court to retrospectively authorise the appointment of solicitors.

  62. [26] A negative answer to this issue was first given by the court in Kirkham. In that case, it was argued that the court could grant retrospective authorisation if the liquidator had “acted promptly and within reasonable time in applying for authorisation”, or if he had failed to do so, if the application was “objectively made in the company’s interests and no objection from any interested party has been raised” (at [29]–[30]). Goh JC did not accept this argument, as he considered the use of the word “after” in the chapeau of s 144(1) to be a sufficiently unequivocal indication that the court did not have any power of retrospective authorisation or ratification of a past appointment (at [31]).

  63. [27] However, a different view was taken on the issue by Choo Han Teck J in the recent case of Re Eye-Biz Pte Ltd (in compulsory liquidation) [2024] SGHC 60 (“Eye-Biz”). Choo J said the following (at [7]–[10]):

  64. [28] Unsurprisingly, the decision in Eye-Biz is front and centre of the Liquidator’s case. The Liquidator submits that the proposition to be derived from Eye-Biz is that the court can grant retrospective authorisation of a liquidator’s appointment of solicitors if the prior appointment by the liquidator was “for the purpose of commencing the very application for that approval itself” [emphasis in original]. In this regard, the Liquidator argues that his appointment of solicitors with effect from 13 July 2023 falls within the exception carved out in Eye-Biz because “no specific action has been taken by the Liquidator with the assistance of solicitors apart from the negotiation of and entering into of the Funding Agreement and the commencement of this SUM 125, and related matters”.

  65. [29] In oral submissions, Orient appeared to take the position that Eye-Biz is inconsistent with Kirkham and that the latter should be followed. Counsel for Orient, Ms Joycelyn Lin (“Ms Lin”), emphasised that the express wording of s 144 contemplates the liquidator’s appointment of solicitors after either approval by the court or committee of inspection. If the court were to allow retrospective authorisation, this would undermine the intent and purpose of s 144 as, in every case, liquidators would simply appoint solicitors first without authorisation before putting in a belated application to backdate the court’s authorisation.

  66. [30] On the other hand, Mr Yang does not go so far as to argue that Eye-Biz is wrong. Instead, he emphasises that the facts of the present case are such that they are distinguishable from Eye-Biz. In this regard, counsel for Mr Yang, Ms Lee Ping (“Ms Lee”), emphasised in her oral submissions the following two distinctions between Eye-Biz and the present case:

  67. (a) First, the extent of backdating sought by the liquidator and granted by the court in Eye-Biz was very short. The matter was heard by Choo J on 27 February 2024 and the appointment was only backdated to 28 December 2023. Thus, the application to court in Eye-Biz was made very promptly after the liquidator’s (unauthorised) appointment of solicitors. In contrast, the COI had already rejected the Liquidator’s proposal to appoint solicitors on 9 November 2022. Yet, the Liquidator purportedly appointed FLC on 13 July 2023, before only taking out the application to court in SUM 125 in January 2024.

  68. (b) Second, the fact that the Liquidator’s proposal had already been rejected by the COI was highly material because it underscored the unacceptability of the delay. Faced with the rejection by one body with the power of authorisation, it was all the more incumbent for the Liquidator to apply to court soonest.

  69. [31] In my judgment, I prefer the approach in Kirkham, and decline, with respect, to follow Eye-Biz.

  70. [32] It is noteworthy that Choo J in Eye-Biz did not actually consider himself to be in outright disagreement with Kirkham. Rather, he considered he was merely distinguishing Kirkham, or at most, carving out a limited exception to it. His reasoning was excerpted at [27] above. In essence, it was as follows:

  71. (a) The general proposition in Kirkham that the word “after” in s 144(1) of the IRDA suggests that a liquidator could only appoint solicitors after obtaining leave of court to do so is correct (Eye-Biz at [8]).

  72. (b) But, starting from the premise that, because a liquidator would have to instruct solicitors to make an application under s 144(1) of the IRDA in the first place, the court must have the power to backdate the appointment of solicitors (if it approves the liquidator’s s 144(1)(f) application) at least to the extent of covering the application for authorisation (Eye-Biz at [7]).

  73. (c) The source of the power to backdate is the court’s inherent powers, which generally allow the court to ratify acts or errors that have been rectified (Eye-Biz at [9]).

  74. (d) The operation of the court’s inherent powers in this way is not foreclosed by the language of s 144(1), as s 144(1)(f) permits the court to grant leave to appoint a solicitor but says nothing on when the appointment is to take effect (Eye-Biz at [10]).

  75. [33] With respect, I am unable to agree with steps (b) to (d) of this reasoning.

  76. [34] The starting point must of course be the text of the statute. In this regard, I agree with Goh JC in Kirkham that the language of the statutory provision is clear and unambiguous. Section 144(1)(f) plainly states that the Liquidator may appoint a solicitor after either the court or the committee of inspection has granted its authorisation to him. That being the case, I do not see how one can read s 144(1) as consistent with allowing the court to ratify ex post facto an earlier appointment or to backdate its authorisation to a date before the time when it grants it.

  77. [35] The court in Eye-Biz did not dispute the correctness of this proposition in step (a) of its analysis. In my view, steps (b) to (d) of the reasoning in Eye-Biz cannot follow from this starting point. If the statute clearly states that the liquidator may only appoint solicitors after authorisation, carving out an exception enabling the liquidator to sometimes appoint solicitors before authorisation disregards the plain words of the text.

  78. [36] This conclusion is also confirmed by the context of s 144(1)(f) of the IRDA. Section 144(1) sets out powers or actions that a liquidator may only take with the imprimatur of the court or the committee of inspection. In contrast, s 144(2) sets out powers that the liquidator may unilaterally exercise without such third-party authorisation. The statute clearly draws a bright line between actions that can be taken with and without authorisation; indeed, the line is drawn even more particularly between acts requiring prior authorisation and acts that do not. In my respectful view, to recognise an exception of the sort in Eye-Biz distorts the legislative scheme. If the legislature had intended the liquidator to be able to appoint solicitors without requiring any prior authorisation, it would have set this out under s 144(2).

  79. [37] Further, apart from the text, one must give weight to the intention behind s 144 being structured in this way. The legislature has instituted a gatekeeper – either the committee of inspection or the court – before the exercise of certain powers for a reason. It must be that such powers have been deemed to require circumspection in their exercise such that third-party authorisation is required. I therefore agree with Ms Lin’s submission that a jurisdiction for ex post authorisation undermines the legislative intent underlying s 144(1)(f) of the IRDA.

  80. [38] It is for these reasons that I respectfully disagree with Choo J’s reasoning in steps (c) and (d) in relation to the permissibility of invoking the court’s inherent powers as the juridical source of the power to backdate the court’s authorisation (see [32] above). I prefer the contrary view expressed by Goh JC in Kirkham that “a court’s inherent power to grant a retrospective authorisation, even if such a power exists, must yield to clear statutory language that suggests otherwise” (at [35]).

  81. [39] I note also that Choo J framed the effect of s 144(1)(f) as “permit[ting] the court to grant leave to appoint a solicitor” (Eye-Biz at [10]). With respect, that might not be entirely accurate. Section 144(1)(f) does not merely grant the court the power to grant leave to appoint a solicitor. It certainly does that, but the more crucial point is that it prescribes that the liquidator must come to court before appointing the solicitor. Thus, to frame s 144(1)(f) as merely an empowering provision granting the court a freestanding power to appoint solicitors is incorrect, as the court’s power cannot be divorced from the role that it plays in the process as an ex ante safeguard.

  82. [40] Finally, I address step (b) in Choo J’s analysis. To recapitulate, the learned judge considered that there must be a power for the court to backdate its authorisation because a liquidator would have to appoint solicitors to file the application for authorisation in the first place (see [32] above). It is evident that Choo J considered s 144(1)(f) to create a problem of circularity as a liquidator would have to appoint solicitors to file the application for authorisation to appoint solicitors, and it was thus necessary to cut the Gordian knot by allowing the court to backdate its authorisation at least to cover the application.

  83. Whether the Liquidator should be required to bear the costs of FLC’s appointment

  84. [45] In Kirkham, Goh JC framed the operative question as whether the liquidator had “good reasons” for not seeking the court’s authorisation prior to his or her appointment of solicitors (at [40]). I find the following considerations to be relevant to answering this question (see Kirkham at [42]):

  85. (a) whether the liquidator had brought the application promptly and within reasonable time;

  86. (b) whether the liquidator had acted in good faith in the discharge of his duties; and

  87. (c) the court should not employ the benefit of hindsight when assessing the liquidator’s conduct and decision(s) at the material time.

  88. [48] The Liquidator’s claim that he had appointed FLC on 13 July 2023 means that nearly half a year had elapsed from the date of appointment until he filed his present application in SUM 125 for the court’s authorisation for him to appoint FLC (viz, 10 January 2024). The length of the delay, in my view, is by itself a factor that considerably weighs against the Liquidator.

  89. [49] Moreover, I find that when viewed in the circumstances and context of this case, the length of the delay soundly crosses into the realm of unreasonable conduct. Two compounding circumstances are significant.

  90. [50] First, at the time when the Liquidator appointed FLC on 13 July 2023, he was not only acting without authorisation under s 144(1) per se, but was acting in defiance of the decision of the COI – one of the authorising entities in s 144(1) – who had previously (on 9 November 2022) rejected his proposal to appoint solicitors. I agree with Ms Lee that, in these premises, the reasonable thing for the Liquidator to do should have been to apply to court promptly to override the COI’s decision.

  91. [51] Second, as I have highlighted above (at [45]), it is necessary to eschew the use of hindsight when assessing the reasonableness of the Liquidator’s conduct. The significance of this in the present case is that, at the time when the Liquidator appointed FLC, the prevailing law at the time was that set out in the Kirkham decision. Indeed, by that time Kirkham had been the law for close to half a year given that Goh JC’s decision was delivered on 25 January 2023. The contrasting decision in Eye-Biz was only handed down in March of this year. So, even at the time when SUM 125 was filed by the Liquidator (ie, 10 January 2024), the law was that set out in Kirkham. It follows that, as a matter of logic, the Liquidator could not claim to have relied on Eye-Biz when he appointed FLC without obtaining prior court authorisation. He must be taken to have known the position in Kirkham, and in choosing to act the way he did, he chose to run the exact risk that the court in that case had expressly cautioned against (at [43]):

  92. [53] In fairness to the Liquidator, I have also considered his counsel’s oral submission that he did not seek authorisation until SUM 125 because there would have been no point in bringing an application for authorisation if the Funding Agreement had not been successfully negotiated.

  93. [54] There is no merit in this submission. I see no axiomatic link between the success of negotiating the Funding Agreement and making an application under s 144(1)(f) of the IRDA for authorisation to appoint FLC. The Liquidator could, and should, have filed an application under s 144(1)(f) for authorisation to appoint FLC to conduct these negotiations and any preparatory work relating to the Funding Agreement.

  94. [55] Put simply, it contradicts the purpose of s 144(1)(f) for a liquidator to take it upon himself to act for a sustained period of time without authorisation, before coming to court and trying to present the result of his unauthorised conduct – even if beneficial to the company – as a fait accompli. Although the good faith of a liquidator is certainly a relevant factor, it does not by itself suffice to insulate him from the consequences of defying the clear and unambiguous words of the statute as well as recent High Court authority confirming the same.

  95. SUM 125: Whether the court should authorise the Liquidator to enter into the Funding Agreement with AMT

  96. [56] I come to the Liquidator’s application for authorisation to enter into the Funding Agreement.

  97. [57] As a preliminary point, I find that it is necessary to be clear on the legal basis on which the Liquidator is making his application. Under the Funding Agreement, Mingda will assign to AMT the proceeds of recovery in respect of (a) Mingda’s unfair preference claims against Orient under s 225 of the IRDA; and (b) Mingda’s claim for recovery of property disposed to Mr Yang after the commencement of winding up pursuant to s 130(1) of the IRDA.

  98. [58] The sources of the Liquidator’s power to assign the proceeds of these two actions are in fact different. It is important to clearly delineate the source of the Liquidator’s power because the requirements of the exercise of different powers by a liquidator may differ. Parties and counsel should therefore ensure that they are clear on what the relevant statutory provision or other source of the power that they are seeking to rely on is and frame their submissions to answer to those requirements accordingly.

  99. [59] For the unfair preference claims, the Liquidator identifies – correctly –s 144(1)(g) of the IRDA as the statutory source of his power to assign the proceeds of said actions:

  100. [60] In contrast, it is apparent from the text of s 144(1)(g) that it does not deal with the proceeds of an action to recover property under a void disposition pursuant to s 130(1) of the IRDA, which is the claim that the Liquidator intends to bring against Mr Yang. In this regard, the Liquidator submits that “[t]he Court has the inherent power to assign the proceeds under section 130 of the IRDA”.

  101. [61] I am not convinced that the Liquidator’s invocation of the court’s inherent powers as the basis for the assignment of the potential action based on s 130(1) is correct or necessary. In my view, there is a statutory source that the Liquidator has not relied on, which is s 144(2)(b) of the IRDA:

  102. It is noteworthy that, unlike s 144(1)(g), a liquidator does not require the approval from the court or the committee of inspection insofar as s 144(2)(b) is concerned. But as Chua Lee Ming J observed in the High Court decision in Lavrentiadis, Lavrentios v Dextra Partners (in liquidation) and another matter [2023] 5 SLR 1288 (“Lavrentiadis”), it is common practice for funders to err on the side of caution and impose a condition precedent that court approval be obtained even where an assignment is being made under s 144(2)(b) (at [17]). The present case is no exception.

  103. [62] It is now well-established that s 144(2)(b) enables a liquidator to sell not only the cause of action itself, but the fruits of a cause of action as well (see the High Court decision Re Vanguard Energy Pte Ltd [2015] 4 SLR 597 (“Vanguard Energy”) at [24]; Lavrentiadis at [13]).

  104. [64] The English authorities have generally described the cause of action available to the company as a “restitutionary” claim (see the English Court of Appeal decision in Hollicourt (Contracts) Ltd (in liquidation) v Bank of Ireland [2001] 1 BCLC 233 at [22]). This obviously includes, but is not limited to, a claim in unjust enrichment, as elucidated in the following observations by the English High Court in Officeserve Technologies Ltd (in compulsory liquidation) v Annabel’s (Berkeley Square) Ltd and others [2018] 3 WLR 1568 (at [22]):

  105. [65] The fact that s 130(1) of the IRDA is of this “slightly different” character – as noted by Trower J in the English High Court decision in In re Fowlds (A Bankrupt) [2022] 1 WLR 61 (at [86]) – than the other statutory avoidance provisions (which do legislate a remedy) provides a ready explanation for its exclusion from the list containing these other provisions in s 144(1)(g) above. Given that the actual recovery of property by the company is a matter of general law causes of action like unjust enrichment and tort, any such claims – including the intended claim against Mr Yang – are assignable under the general provision in s 144(2)(b) of the IRDA.

  106. [66] To sum up the above:

  107. (a) the unfair preference claims against Orient pursuant to s 225 of the IRDA are assignable under s 144(1)(g) of the IRDA; and

  108. (b) the claim against Mr Yang to recover a void disposition of property effected by s 130(1) of the IRDA is assignable under s 144(2)(b) of the IRDA.

  109. [67] I have found it necessary to set out the above because of the following development during the hearing:

  110. (a) First, in her oral submissions, Ms Lee raised an objection based on the Liquidator’s failure to make an explicit application for permission under regs 37 and 39 of the IRD (CWU) Regulations (see [59] above).

  111. (b) Second, in response to this, counsel for the Liquidator, Mr Tham Wei Chern (“Mr Tham”), stated in his oral reply, quite peculiarly, that he only referred to s 144(1)(g) as the “backdrop” (and so regs 37 and 39 were not engaged), as the Liquidator’s application was under s 204 of the IRDA. I understood this to mean that the Liquidator was essentially ‘piggybacking’ off AMT’s application in OA 26 for priority under s 204 of the IRDA.

  112. [68] I will first address the second of these points briefly. With respect, I have grave difficulty with the Liquidator’s rather cavalier disclaimer of his reliance on s 144(1)(g) of the IRDA. I do not see how it is possible for the Liquidator to not have to rely on s 144(1)(g) of the IRDA insofar as the Funding Agreement contemplates that the proceeds of the unfair preference action against Orient will be assigned to AMT. Prior to the introduction of s 144(1)(g) of the IRDA, the position appeared to be that a liquidator did not have the power to assign statutory claims such as those based on the avoidance provisions (see Singapore, Ministry of Law, Report of the Insolvency Law Committee: Final Report (2013) (Chairperson: Lee Eng Beng SC) (“ILRC Report”) at pp 72–73 and 79). Section 144(1)(g) of the IRDA was specifically introduced to remove doubt that liquidators had the power to assign the proceeds of such claims (see Lavrentiadis at [16]). Given this, the Liquidator has no choice but to rely on s 144(1)(g) of the IRDA, and more importantly, cannot simply wave away objections that he has failed to comply with its requirements.

  113. [69] AMT’s application in OA 26 under s 204(3) of the IRDA is a related but different matter altogether. The issue in OA 26 is whether the court should grant AMT the advantage that the terms of the Funding Agreement seek to confer onto it. The issue in OA 26 is not whether the Liquidator and Mingda should be allowed to enter into the Funding Agreement insofar as the assignment of the proceeds of the causes of action against Orient and Mr Yang are concerned. The latter is a logically anterior matter to the former, and it is the subject of SUM 125 which is governed by ss 144(1)(g) and 144(2)(b) of the IRDA. As a result, the Liquidator cannot merely piggyback off AMT’s application or fudge the issues in SUM 125 and OA 26 together as his counsel appeared to do.

  114. Whether the Liquidator has failed to comply with the IRD (CWU) Regulations

  115. [70] I turn to address the first point at [67] above, which is Ms Lee’s objection that the Liquidator has failed to comply with the IRD (CWU) Regulations.

  116. [71] In my judgment, the Liquidator has not failed to comply with the IRD (CWU) Regulations. I acknowledge the force in Ms Lee’s argument to the extent that it exposes that the Liquidator’s prayers could (and should) have been drafted with more particularity, but I do not think that the Liquidator has been non-compliant with any legal requirement.

  117. [72] The crux of Ms Lee’s argument is that the Liquidator has not made an express prayer seeking permission under regs 37 and 39 of the IRD (CWU) Regulations. In principle, regs 37 and 39 would be engaged because the funder in the present case, AMT, is a member of the COI. As Chua J explained in Lavrentiadis, the rationale underlying regs 37 and 39 is to protect the creditors of the company from the conflict of interest in dealing with a member of the committee of inspection, who in that capacity stands in a fiduciary vis-à-vis the other creditors (at [39]).

  118. [73] As a preliminary point, I agree that regs 37 and 39 are engaged in this case. Regulation 37 requires the court’s sanction to be obtained if a member of the committee of inspection seeks to purchase, either directly or indirectly, any of the company’s assets. In this case, AMT is at least indirectly purchasing Mingda’s assets. Regulation 39 requires the court’s sanction to be obtained if a member of the committee of inspection stands to make a profit on the transaction. In this case, depending on the amount actually disbursed by AMT under the Funding Agreement, the amount actually recovered by the Liquidator in his claims against Orient and Mr Yang, as well as the amount actually paid out to AMT under the Funding Agreement, it is possible for AMT to make a profit insofar as it is paid a larger sum than the amount it funded. Specifically, payments past the first level of the Distribution Waterfall (viz, repayment of the amount disbursed by AMT under the Indemnity) would amount to profit to AMT arising from the Funding Agreement.

  119. [74] Nevertheless, I do not find that the wording of regs 37 and 39 require a liquidator to take out a specific application or make an express prayer for permission under these provisions specifically. I am cognisant that, in the Lavrentiadis case, the applicant liquidator did seek express permission pursuant to reg 37 (see the court’s summary of the liquidator’s application in Lavrentiadis at [11]). Indeed, the court’s records indicate that no express prayer had been made during the initial issue of the summons, but the liquidator had taken out an amendment summons (HC/SUM 260/2023) to introduce express prayers relating to reg 37. However, I do not think that this is a strict legal requirement.

  120. [75] In my view, regs 37 and 39 only require that the transaction be sanctioned by the court, and do not go so far as to require a specific application or prayer to be made in respect of them. Thus, if an application is made under s 144(1)(g) of the IRDA for court authorisation of a proposed assignment of proceeds from a statutory avoidance claim, that would suffice by itself even if the applicant does not make a specific prayer under reg 37 and/or reg 39.

  121. Whether the requirements for leave to enter into the Funding Agreement are satisfied

  122. [77] The applicable principles for determining an application under ss 144(1)(g) and 144(2)(b) of the IRDA are comprehensively set out in the High Court’s decision in Lavrentiadis. In sum, relevant considerations that the court will take into account include (see Lavrentiadis at [19]):

  123. (a) whether the liquidator is acting in good faith, which is an overarching consideration;

  124. (b) whether the sale or assignment is in the interests of the company and its creditors;

  125. (c) whether the funding agreement conflicts with any public policy; and

  126. (d) whether the terms of the funding agreement conflict with any written law, in particular the IRDA and the regulations made thereunder.

  127. (1) Whether the Liquidator is acting in good faith

  128. [78] I am satisfied that there is no reason to question the Liquidator’s good faith in the present case.

  129. [79] I accept the reasons that the Liquidator has put forward in his written submissions. There is no dispute that Mingda’s assets fall woefully short of meeting the claims of its creditors. The claims against Orient and Mr Yang, if successful, will no doubt swell the assets of the company and improve the prospects of recovery for creditors. As no creditor other than AMT has stood forward to offer funding to the Liquidator, the Funding Agreement is the only means for the Liquidator to pursue these claims (see Lavrentiadis at [20]).

  130. [80] I highlight in particular two objections that the opposing creditors have made, which I shall address in turn:

  131. (a) First, Mr Yang points to the fact that the Liquidator only intends to bring proceedings against Orient and him, and argues that the Liquidator has acted unfairly because, during the same period that the impugned payments and dispositions of property to Orient and him were made, AMT itself was paid a substantial amount. To complete the argument, it appears that Mr Yang’s point is that if the payments to Orient and him are voidable, so are the payments to AMT, such that the Liquidator should be bringing claims against AMT as well.

  132. (b) Second, Orient contends that there is reason to believe that the Liquidator’s decision in entering into the Funding Agreement is motivated by his own self-interest. Specifically, as things currently stand, Mingda is so hopelessly insolvent that its remaining assets are insufficient to cover even the Liquidator’s costs. Thus, Orient submits that the Liquidator’s real intention is to swell Mingda’s assets so that his fees and expenses can be paid out of the proceeds of recovery.

  133. [81] In my judgment, neither of these objections raise any real doubt as to the Liquidator’s good faith.

  134. [82] The first objection, in sum, is to call into question the Liquidator’s good faith based on supposed differential treatment of Orient and Mr Yang on the one hand, and AMT on the other. I do not accept this submission. In the first place, it is necessary to bear in mind the starting point that “a court does not readily interfere with a liquidator’s discretion”. Thus, it is only where the liquidator’s exercise of his power is so absurd that no reasonable liquidator could have acted in that way that the court will intervene in the liquidator’s decision-making (see the High Court decision in Solvadis Commodity Chemicals Gmbh v Affert Resources Pte Ltd [2018] 5 SLR 1337 (“Solvadis”) at [35]).

  135. [83] This principle must include the liquidator’s decision on the issue of what asset recovery or misfeasance actions that the company should bring, as well as against whom. The mere fact that there may lie a plausible cause of action against AMT, and the Liquidator has chosen not to pursue it, does not suffice to cast doubt on the Liquidator’s bona fides. There might be good reasons for the Liquidator’s decisions. For example, in relation to the unfair preference claim against Orient, Orient is potentially – I make no firm decision on this, given that it is a matter for the court hearing the substantive application – a “person who is connected with the company”, such that in pursuing the claim against Orient, the Liquidator would have the advantage of a presumption of insolvency when establishing the elements of the unfair preference action (see s 226(3) of the IRDA). As regards Mr Yang, the Liquidator might have considered that the relatively indiscriminate effect of s 130(1) of the IRDA meant that there were good prospects of succeeding in an action against Mr Yang. These are just some examples of reasons that I can identify with relative ease as to why the Liquidator may have made the decision to pursue only Orient and Mr Yang. The existence of such readily identifiable or conceivable reasons, to my mind, means that it cannot be said that the Liquidator’s decision is outrageously unreasonable for the court to have reason to doubt his good faith.

  136. [84] As for the second objection, I find that Orient’s submission is based on the flawed premise that the Liquidator’s interests are necessarily diametrically opposed to the creditors’ interests, such that a course of action advantageous to the Liquidator must ipso facto mean that he is not acting in good faith in the interests of the creditors. It is no doubt true that, if Mingda succeeds in its actions against Mr Yang and Orient, the Liquidator would probably benefit from the proceeds of recovery. This happens as a matter of common sense because every liquidator is inevitably a creditor of his company; indeed, a liquidator is a preferential creditor under the statutory scheme (see s 203(1)(a) of the IRDA). Given this, I do not think that it suffices to impugn the Liquidator’s good faith by saying that he stands to benefit from the proceeds of recovery if, as in this case, the Funding Agreement stands to benefit Mingda and its other creditors generally as well (see the Court of Appeal decision in PricewaterhouseCoopers LLP and others v Celestial Nutrifoods Ltd (in compulsory liquidation) [2015] 3 SLR 665 at [52]).

  137. (2) Whether the Funding Agreement is in the interests of Mingda and its creditors

  138. [85] The Funding Agreement is clearly in the interests of Mingda and its creditors. As mentioned above, Mingda is currently hopelessly insolvent such that not a single cent currently stands to trickle down to the unsecured creditors. In contrast, if the claims against Orient and Mr Yang pan out as the Liquidator intends, the Liquidator estimates that the unsecured creditors – including the objecting creditors – stand to recover up to 4% of their admitted claims.

  139. [86] At the hearing, there was some dispute between the parties as to whether AMT stood to profit from the Funding Agreement. But, in my view, that by itself is neither here nor there (see Vanguard Energy at [30]), given the following observations by Chua J in Lavrentiadis (at [22]):

  140. [87] Put differently, the point is that a profit-making element is a ubiquitous aspect of extensions of credit by a funder, regardless of whether the party being funded is solvent or insolvent. Indeed, as a matter of common sense, funders of insolvent companies undertake higher risks of default such that it is entirely rational behaviour for them to impose a higher interest rate as a means of protecting their position, if they do decide to even extend funding at all. The law does, in fact, recognise this. An example is the provisions found in the IRDA allowing for various levels of priority to be granted to rescue financing (see s 67 of the IRDA; and the High Court decisions in Re Attilan Group Ltd [2018] 3 SLR 898 and Re Design Studio Group Ltd and other matters [2020] 5 SLR 850). There is no reason why the law should preclude what is ordinary commercial behaviour on the part of funders.

  141. [88] Moreover, the ILRC Report expressly contemplates that a funder may seek, and properly receive, benefits beyond the amount of funding extended being repaid in priority to the company’s other debts and liabilities (at p 72):

  142. [89] Thus, the question is not whether AMT stands to receive a profit per se but whether such profit is so extravagant that it is objectionable (see Lavrentiadis at [23]). I am satisfied that it is not. I will consider the extent of the advantage sought by AMT in fuller detail below when addressing OA 26, but for present purposes, it suffices to say that I am satisfied that the Funding Agreement is in the interests of the creditors because, if the Liquidator is successful in recovery against Orient and Mr Yang, it is not only AMT but the other creditors – including Orient and Mr Yang – who would stand to benefit from the recoveries. In this event, the creditors would have received a benefit without having to put any skin in the game as AMT has.

  143. (3) Whether the Funding Agreement conflicts with any public policy or written law

  144. [90] I am satisfied also that the Funding Agreement does not conflict with any public policy or written law.

  145. [91] It is settled that the statutory powers of assignment relied on by the Liquidator in the present case – viz, ss 144(1)(g) and 144(2)(b) – are statutory exceptions to the doctrine of maintenance and champerty (see Vanguard Energy at [29]; Solvadis at [28]).

  146. [92] Nevertheless, in Lavrentiadis, Chua J considered that the court should not merely stop there but go on to consider whether, on a more general level, the funding agreement is consistent with the underlying policy of the doctrine of maintenance and champerty, which is the proper administration of justice (at [27]–[29]). In this regard, the learned judge observed that “the public policy concerns about the administration of justice are addressed where the control of the legal proceedings lies primarily with the liquidator” (at [30]).

  147. [93] This applies to the present case. The Funding Agreement does not assign the cause of action, but merely the proceeds. Indeed, insofar as the unfair preference claims are concerned, this would not be possible given that s 144(1)(g) only empowers a liquidator to assign the proceeds of such claims. Further, to put the point beyond doubt, the Funding Agreement contains an express stipulation that the Liquidator retains full control over the litigation, albeit with an obligation to consult with AMT:

  148. [94] For these reasons I am satisfied that the Funding Agreement is compliant with public policy.

  149. [95] As for the separate question of compliance with written law, I have found above (at [75]) that the Liquidator’s failure to seek specific permission under regs 37 and 39 of the IRD (CWU) Regulations is of no strict legal consequence. For the reasons I have explained above as to why I am satisfied that the Liquidator is acting in good faith and that the Funding Agreement is in the interests of Mingda’s creditors, I find that regs 37 and 39 are satisfied as well. There is therefore also compliance with written law in the present case.

  150. (4) Conclusion

  151. [96] Given that I am satisfied that the requirements under ss 144(1)(g) and 144(2)(b) are met in this case, I allow the Liquidator’s application for authorisation to enter into the Funding Agreement in SUM 125.

  152. OA 26: Whether AMT should be granted the advantage sought under s 204(3) of the IRDA

  153. [97] I come to AMT’s application in OA 26 to be given an advantage under s 204(3) of the IRDA.

  154. [98] I start with setting out the applicable legal framework, along with some general comments on the approach that should be taken in such applications based on my observations in the present case.

  155. [99] Section 204 of the IRDA provides as follows:

  156. [100] The applicable principles to an application under s 204(3) of the IRDA were comprehensively summarised by Goh Yihan JC in the High Court decision of Song Jianbo v Sunmax Global Capital Fund 1 Pte Ltd (in compulsory liquidation) [2023] 4 SLR 1575 (“Song Jianbo”). I adopt these principles, along with the following analytical framework set out in that case (at [8]):

  157. (c) Third, what safeguards, if any, should be incorporated into the Funding Agreement?

  158. [102] In my view, it is important that counsel do not elide the distinction between retrospective and prospective orders, especially when references are made to foreign authorities. This is because the insolvency laws of foreign jurisdictions may not provide for prospective orders. An example of this is Australian law, as the relevant provision thereunder – viz, s 564 of the Australian Corporations Act 2001 (Cth) – only empowers the court to make orders after the recovery of property:

  159. [103] The nature of the inquiry may differ as between the prospective and retrospective context. In this regard, I note that Goh JC in Song Jianbo made the following comments that might, at first blush, be read as downplaying this distinction (at [20]):

  160. [105] An illustration of the significance of the retrospective-prospective distinction and the perils of attempting a statistical analysis from the present case may be apposite. In the present case, counsel for SRT, Mr Lam Zhen Yu (“Mr Lam”), stated in his oral submissions that it was rare for a court to grant a funding creditor an advantage in respect of 100% of its admitted debt against the company. He did so by tendering a visual aide consisting of a table of various Australian authorities (cited by AMT) which stated the percentage of the funding creditor’s admitted debt that the creditor recovered in each case.

  161. [107] I would, however, go further than Mr Lam to say that, in many of the Australian cases cited by parties, the courts were mainly focused on casting the advantage as a percentage of the recovered proceeds rather than a percentage of the funding creditor’s debt. It is therefore necessary to be clear, when citing an authority, whether a reference to “100% recovery” by the court is a reference to the former rather than the latter. To take one example, SRT states that “readily granting a 100% advantage may unduly encourage the settling of claims”, and cites the following statement of Hodgson JA in the New South Wales Court of Appeal decision in State Bank of New South Wales and another v Brown (as liq of Parkston Ltd (in liq)) and others (2001) 38 ACSR 715 in support (at [92]):

  162. In this statement, Hodgson JA was speaking of a 100% recovery vis-à-vis the recovered proceeds, rather than the funder’s debt. The learned judge’s caution, strictly speaking, was less (if at all) that the court should be cautious about granting the funding creditor priority in the repayment of 100% of his debt, but that the court should be cautious against granting the funding creditor the entirety of the recovered proceeds.

  163. [108] Bearing this in mind, I now come to the following statement by Goh JC in Song Jianbo, which the objecting creditors – in particular, Mr Yang and SRT – rely upon (at [47]):

  164. [109] The objecting creditors unsurprisingly emphasise the phrase a “very significant evidentiary and persuasive onus”, which they submit is applicable to AMT’s application. I make two points in respect of this. First, as Ms Chua pointed out in her oral reply submissions, that statement does not strictly apply in the present case given that AMT is only seeking 100% of the Recovered Assets to the extent that it is less than 100% of its admitted debt. Second, and most importantly, I find that Goh JC’s reference to that phrase should not detract from the more general point that I understand him to have been making, which is to eschew any attempt at laying down hard-and-fast-rules on what percentages may be warranted in favour of an approach of achieving a “just result” on the particular facts of the case. Indeed, this is exactly the point that was being made in the case that Goh JC cited – the New South Wales Supreme Court decision in Jarbin Pty Ltd v Clutha Ltd (in liq) (2008) 208 ALR 242. Whilst Campbell J did say that a “very significant evidentiary and persuasive onus” had to be discharged to justify a funding creditor receiving 100% of the recovered proceeds, this statement was immediately preceded by the more general point that although (at [71]):

  165. [110] I respectfully agree with this approach. I do not think that there is anything to be gained in attempting to generalise a case or circumstances in which a particular type of award, quantum or percentage should be granted. For this reason, I advise that it is not a fruitful exercise for counsel to attempt to draw up tables of the percentages awarded in past cases in a bid to illustrate a general statistical trend as to what awards have been granted. An application under s 204(3) of the IRDA is governed by principle rather than statistics.

  166. Whether an order under s 204(3) of the IRDA should be granted to AMT

  167. [113] Second, as to the substantive question of whether AMT should be given an advantage for providing the Indemnity to the Liquidator, the following non-exhaustive list of factors identified by Goh JC in Song Jianbo are instructive signposts (at [23]):

  168. (a) the complexity and necessity of the proceedings in respect of which the funding or indemnity is given;

  169. (b) the extent of the funding or indemnity to be provided, and the level of risk to be undertaken and the costs to be borne by the funding creditor;

  170. (c) the failure of other creditors to provide funding or indemnity and whether the other creditors were given an opportunity to do so;

  171. (e) the public interest in encouraging creditors to provide funding or indemnity to enable assets to be recovered; and

  172. (f) the presence or absence of any objections from the other creditors, the liquidator or the Official Assignee.

  173. (1) The necessity of the proceedings against Orient and Mr Yang

  174. [114] I am satisfied that the actions against Orient and Mr Yang, in respect of which AMT has granted the Indemnity to the Liquidator, are necessary in the present case.

  175. (2) The public interest in encouraging AMT to provide funding to Mingda to enable assets to be recovered.

  176. [117] AMT submits that “there is public importance and necessity in discouraging misconduct in relation to companies” (citing Song Jianbo at [16]). I accept this submission and agree it is apposite to the present case. Mr Yang is a former director of Mingda, and Orient is a related entity to him. The nub of the Liquidator’s allegations against Orient and Mr Yang is that they have essentially committed asset-stripping against Mingda during the twilight period leading up to Mingda’s insolvent liquidation (and indeed, in the case of Mr Yang, after Mingda had been put into liquidation). As Goh JC observed in Song Jianbo, “there is a public interest in encouraging a creditor to provide funding where there is allegation of misfeasance by the former director of the company” (at [39]), as Mr Yang is in the present case.

  177. (3) The level of risk undertaken by AMT

  178. [118] I turn to the level of risk undertaken by AMT. This is the major point of disagreement between AMT and SRT, who is the principal objecting creditor in OA 26.

  179. [119] AMT submits that it bears considerable risk in entering into the Funding Agreement. It emphasises that there is no assurance that the contemplated litigation against Orient and Mr Yang would result in the successful recovery of assets. AMT does not only undertake the risk that the Liquidator fails in court, as even if he does, there is the additional risk that the Liquidator may fail in obtaining satisfaction of the judgment from the defendants.

  180. [120] On the other hand, SRT contends that the level of risk undertaken by AMT is “low to moderate at best”, pointing to the following factors:

  181. (a) First, that because AMT’s funding has come relatively late in the liquidation, a lot of the legwork (in terms of investigations) has already been completed by the Liquidator such that AMT is acting with greater certainty and confidence in success. This stands in contrast to a case where funding is extended prior to (and/or to enable) investigations by the liquidator, in which there is considerably more risk due to uncertainty as to the results of the liquidator’s investigations.

  182. (b) Second, that AMT has instituted a fixed cap on the amount of the Indemnity provided to the Liquidator as a means of limiting the amount of risk that it is undertaken.

  183. (c) Third, that the clawback actions against Orient and Mr Yang that AMT intends to fund are not particularly complex, as they do not entail any particularly involved dispute of fact or novel issues of law.

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