Hong Investment Pte Ltd v Tai Thong Hung Plastics Industries (Pte) Ltd

Tan Lee Meng J:

[1] These proceedings concerned an application by the petitioner, Hong Investment Private Limited (“HIPL”), for an order that Mr Roland Mah Kah Eng (“RM”) and his younger brother, Mr Jason Mah Kah Leong (“JM”), be removed as the liquidators of Tai Thong Hung Plastics Industries (Pte) Ltd (“the Company”) and that Mr Chung Siang Joon (“Mr Chung”) be appointed as the liquidator of the Company. After hearing the parties, I ordered that the present liquidators be removed and that Mr Chung be appointed as the new liquidator of the Company. I now set out the reasons for my decision.

[2] On 17 October 2003, both RM and JM were appointed as liquidators of the Company by the court after HIPL successfully petitioned to wind up the Company on the basis of the latter’s failure to pay a judgment debt to it. More than 7 years have passed since they were appointed the liquidators of the Company.

[3] HIPL’s application to have the liquidators removed was prompted by a letter that its solicitors received from the Official Receiver on 24 August 2010, part of which was as follows:

[4] While the Official Receiver may have had concerns about the liquidators’ accounts, it was not true that JM had not renewed his licence to act as a liquidator for the purposes of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) as his licence, which was renewed by the Accounting and Corporate Regulatory Authority on 1 April 2009, was valid until 31 March 2012. When HIPL informed the Official Receiver about this, the latter replied that its position remained the same, namely that it would not object to the removal of the liquidators.

[5] Section 268(1) of the Act provides that a “liquidator appointed by the Court may resign or on cause shown be removed by the Court”. The position is summed up in Woon & Hicks, The Companies Act of Singapore - An Annotation, (LexisNexis, Looseleaf Ed, 2004, Issue 2) at para 3105-3125 as follows:

[6] In Re Keypak Homecare Ltd (No 1) [1987] BCLC 409, Millet J pointed out that the words “on cause shown” are very wide and it would be wrong for a court to limit or define that kind of cause which is required as circumstances vary widely. He added that it may be appropriate to remove a liquidator even if nothing can be said about him personally or about his conduct of the particular liquidation. In Yap Jeffrey Henry and anor v Ho Mun-Tuke Don [2006] 3 SLR(R) 427, Judith Prakash J adopted Millet J’s view and stated at [22] that the removal of the liquidator “does not necessarily mean that fault of any sort has been found with the liquidator” and it may well be that “in the circumstances that have arisen in the case the court considers that there was cause to remove him”.

[7] JM contended that it is better to allow the present liquidators to complete the final stage of the liquidation. However, according to HIPL, there was cause for the replacement of the liquidators. It pointed out that based on the liquidators’ accounts filed with the Official Receiver, the liquidators have made a number of payments to Vorspann Pte Ltd (“Vorspann”), of which JM is the managing director and a shareholder. The payments to Vorspann included $6,000 for accounting fees, $660 for secretarial fees, $900 for liquidation account fees and $1,500 for audit fees. Apart from paying Vorspann, the liquidators have also paid “secretarial fees” amounting to $6,800 to RM’s own firm.

[8] Also rather alarming was the fact that liquidators’ fees amounting to $45,690 have been paid to RM and JM without complying with s 268(3) of the Act, which provides as follows:

[9] There being no committee of inspection and no meeting of creditors to approve the liquidators’ remuneration, the $45,690 should have been approved by the Court. No application was made to the court for the requisite approval.

[11] Leaving aside the serious concerns about the liquidators’ accounts for the moment, what was rather unsatisfactory was the liquidators’ attitude towards their obligations as liquidators. RM, who did not contest the application, was in poor health and was not interested in carrying on as the liquidator of the Company. On 14 September 2010, he wrote a letter to HIPL’s solicitors, Messrs Tan Lim Partnership, part of which is as follows.

[12] Remarkably, in his letter of 14 September 2010, RM also voiced some dissatisfaction about his co-liquidator. He stated:

[13] After voicing his concerns about his co-liquidator and saying that the Company’s cheque book should not be in JM’s possession, RM wrote to the Official Receiver on 20 September 2010 to say that there is no need to replace the liquidators. Part of his letter is as follows:

[14] The fact that a liquidator has been appointed by the Court does not mean that he will not be replaced with another liquidator by the Court if the situation warrants this. Furthermore, an application to remove a liquidator is a rather serious matter and the allegations by HIPL do not, as RM claims, concern a “very minute matter”. RM ought to have known that whether or not his brother was distressed with an application to remove him as the liquidator is not a matter that is relevant to a decision by the court to retain or replace the Company’s liquidators.

[15] As for the second liquidator, JM, whose registration as a public accountant was cancelled with effect from 19 November 2007 by the Oversight Committee appointed under the Accountants Act (Cap 2, 2005 Rev Ed), his explanation as to why he had consented to become the liquidator of the Company raised eyebrows. On 16 September 2010, he e-mailed HIPL’s solicitors as follows:

[16] Liquidation of a company should be undertaken by a committed liquidator and it was unfortunate that JM regarded himself as having been “dragged” into the “rather unpalatable” task of liquidating the Company on account of the sickness and fragile health of the other liquidator, who happens to be his brother.

[17] The tenor of a second e-mail sent by JM to HIPL’s solicitors on 16 September 2010, may also be viewed with concern. Part of this second e-mail was as follows:

[18] JM should have realised that it was in the Company’s interest that RM be replaced as a liquidator of the Company in view of the latter’s health. In Re Adam Eyton Ltd (1887) 36 Ch D 299, Bowen LJ pointed out that for the purpose of determining whether a liquidator should be removed on the basis of due cause having been shown, the due cause is measured in relation to the "real, substantial, honest interests of the liquidation, and to the purpose for which the liquidator is appointed”. He added that while fair play to the liquidator himself is not to be left out of sight, the measure of due cause is the substantial and real interest of the liquidation.

[19] After considering all the circumstances, I found that there was cause for the replacement of both the current liquidators. As such, I ordered that they be replaced by Mr Chung, who had given his consent to act as the liquidator of the Company.