Tan Holdings Pte Ltd (in creditor’s voluntary liquidation) v Prosperity Steel (Asia) Co Ltd and others

Steven Chong J:

[1] This case concerns an application by a receiver appointed by a judgment creditor to claim for “bonus” shares in a Singapore listed company that the judgment debtor was allegedly entitled to. However the application was challenged at the threshold level that the receiver lacked locus standi to claim the “bonus” shares as the receivership order did not purport to permit the receiver to bring the action on behalf of the judgment debtor. Instead the receivership order merely authorised the action to be brought in the name of the judgment creditor and indeed the application was filed on that basis.

[2] In addition, the application was also opposed on the merits that the judgment debtor was not entitled to the “bonus” shares in the first place and if it did, the right had been transferred to another party in any event. After hearing the parties, I dismissed the application both on the locus standi issue as well as on the merits.

[3] In dismissing the application, I had provided my brief oral grounds which I have elaborated below. This decision will examine the circumstances under which a receiver could be appointed by way of equitable execution in respect of a chose in action allegedly vested in a judgment debtor. The facts of this case were rather complex and needed to be set out in some detail in order to fully understand the nature and origin of the application. It underwent several routes with a view to achieving its objective and along the way, the pivotal locus standi issue was raised but unfortunately, it remained unresolved when the application finally came before me for determination.

[4] The plaintiff, Tan Holdings Pte Ltd (“Tan Holdings”), is a company incorporated in Singapore. On 20 June 2006, Tan Holdings was placed under insolvent voluntary liquidation pursuant to section 290 of the Companies Act (Cap 50, 2006 Rev Ed). Mr Bob Yap Cheng Ghee (“Mr Bob Yap”) of KPMG Advisory Services Pte Ltd (“KPMG”) was appointed as the sole liquidator of Tan Holdings.

[5] The first defendant, Prosperity Steel (Asia) Company Limited (“Prosperity”), is a company incorporated in Hong Kong. It is currently inactive.

[6] The second defendant, Abterra Limited (“Abterra”), is a company incorporated in Singapore, and is listed on the mainboard of the Singapore Exchange Securities Trading Limited. Abterra was formerly known as Hua Kok International Ltd.

[7] The third defendant, General Nice Resources (Hong Kong) Limited (“GNR”), is also a company incorporated in Hong Kong. Unlike Prosperity, GNR is presently still an active company.

[8] Sometime in 2004, Abterra ran into financial difficulties. As part of Abterra’s efforts to restructure its debts, it entered into a Scheme of Arrangement (“the Abterra Scheme”) with its creditors. The Abterra Scheme was sanctioned by an order of court dated 12 January 2005 and Mr Bob Yap was appointed as the Scheme Manager of the Abterra Scheme.

[9] Prior to the sanction of the Abterra Scheme, on 30 August 2004, as part of Abterra’s efforts to raise capital, Abterra had entered into a Strategic Subscription and New Business Agreement (“SSA”) with Prosperity. The SSA provided that Prosperity would invest S$6 million in Abterra by subscribing for shares in Abterra with the result that Prosperity became its majority shareholder that ultimately translated into a 70% stake in Abterra. Essentially, Prosperity was to be the “white knight” of Abterra.

[10] Under the Abterra Scheme, “Contingent Creditors” were to receive “Contingent Conversion Shares” in lieu of their claims against Abterra upon the crystallization of “Contingent Liabilities” as defined under the SSA. In order to preserve Prosperity’s 70% shareholding in Abterra, Prosperity was entitled to call on Abterra for the allotment of “Further Strategic Shares” (“FSS”) whenever “Contingent Conversion Shares” were allotted to the “Contingent Creditors” under clause 8A.5 of the SSA which provided, inter alia, as follows:

[11] On 29 December 2004, before the court sanctioned the Abterra Scheme, Prosperity and Abterra entered into the First Supplementary SSA to vary certain terms of the SSA.

[12] Paragraph 2.9 of the First Supplementary SSA read:

[13] On 14 March 2005, after the court had sanctioned the Abterra Scheme, Prosperity and Abterra entered into a Second Supplementary SSA to vary certain terms of the SSA as amended by the First Supplementary SSA.

[14] Paragraph 3.11 of the Second Supplementary SSA read:

[15] I pause to observe that the reference to the “Agreed Period” in clause 8A.5 of the SSA was initially removed via the First Supplementary SSA, but was reinstated pursuant to the Second Supplementary SSA.

[16] On 17 May 2005, Prosperity and Abterra entered into a Third Supplementary SSA. However, as the Third Supplementary SSA did not vary clause 8A.5 further, it is not relevant to the present application.

[17] The genesis of this application could be traced to a Loan and Assignment Agreement dated 20 January 2005 (“the Loan Agreement”) between Tan Holdings, Prosperity and Bumiputra Commerce Bank Berhad, Singapore (“BCB”). Under the Loan Agreement, Prosperity extended a loan of S$800,000 to Tan Holdings in exchange for which Tan Holdings pledged 60 million shares that it held in Abterra to Prosperity.

[18] Tan Holdings in turn used the S$800,000 loan to purchase Abterra’s outstanding debt to BCB.

[19] A dispute eventually arose in relation to the Loan Agreement that led to the commencement of Suit No 899 of 2008 (“S 899/2008”) on 28 November 2008 by the liquidator of Tan Holdings (“the Liquidator”) against Prosperity for breach of certain implied terms of the Loan Agreement. The details of the Liquidator’s claim in S 899/2008 are strictly irrelevant to the present application. Suffice it to say that Prosperity did not enter an appearance to S 899/2008, and consequently, on 27 February 2009, default judgment was obtained by the Liquidator against Prosperity for the sum of some S$4.4 million.

[20] To enforce the default judgment, on 2 July 2009, the Liquidator applied by way of an ex parte summons before Judith Prakash J in Summons No 2983 of 2009 (“SUM 2983/2009”) and obtained an order (“the Receivership Order”) appointing Mr Lai Seng Kwoon as receiver (“the Receiver”) to receive the profits and moneys receivable in respect of Prosperity’s interest in the FSS under the SSA.

[21] The Liquidator took the position that Prosperity was entitled to 291,515,259 FSS which was derived as follows:

(a) First, he relied on two announcements made by Abterra dated 28 December 2007 and 24 December 2008 on the allotments of Contingent Conversion Shares to Contingent Creditors.

(b) Pursuant to the 28 December 2007 announcement under which United Overseas Bank’s (“UOB”) claim for S$397,800.28 under a corporate guarantee (“the 2007 UOB claim”) was admitted, Abterra allotted 3,043,800 Contingent Conversion Shares to UOB.

(c) Pursuant to the 24 December 2008 announcement under which ECICS Credit and Guarantee Company (Singapore) Pte Ltd’s (“ECICS”) claim for S$9,307.36 under a performance guarantee (“the ECICS claim”), UOB’s claim for S$1,587,572.51 under a corporate guarantee (“the 2008 UOB claim”) and Malayan Banking Berhad’s (“MBB”) claim for S$1,084,728.97 under a corporate guarantee (“the MBB claim”) were admitted, Abterra allotted a total of 121,891,311 Contingent Conversion Shares to the said Contingent Creditors.

(d) Given that seven FSS were to be allotted for every three Contingent Conversion Shares under clause 8A.5 of the SSA, the total number of FSS that Prosperity was entitled to worked out to be 291,515,259.

[22] Upon hearing SUM 2983/2009, Prakash J granted the Receivership Order of which paragraphs 1 and 5 read as follows:

[23] Following the Receivership Order, the Receiver wrote to Abterra to issue 78,694,000 FSS in satisfaction of the judgment debt. In response, Abterra through its solicitor’s letter dated 13 August 2009, declined to do so, inter alia, on the premise that the Receivership Order did not empower the Receiver to request for the FSS on behalf of Prosperity. It would appear that the locus standi issue was flagged by Abterra at a very early stage.

[24] Given Abterra’s refusal to allot the FSS to the Receiver, the Liquidator took out Summons No 4903 of 2009 (“SUM 4903/2009”) on 1 October 2009 in S 899/2008 before Kan Ting Chiu J for determination of the true and proper construction of clause 8A.5 as it stood amended by the Second Supplementary SSA and that pending such determination, the Receiver was not required to comply with paragraph 5 of the Receivership Order. The application in SUM 4903/2009 was contested by both Abterra and GNR as interested parties even though they were not direct parties to S 899/2008.

[25] At the hearing of SUM 4903/2009, Kan J noted that since Abterra was not a party to S 899/2008, it was not desirable to make a determination on the effect of clause 8A.5. The Liquidator then applied for leave to withdraw SUM 4903/2009 so that a fresh application could be filed for the same relief naming Abterra as a party. Kan J granted the leave sought and ordered, inter alia:

[26] At this juncture, I would pause to take note of one other event. Prior to the commencement of S 899/2008, an intervening development took place in relation to Prosperity’s shares in Abterra which has a material bearing on the right to the FSS. On 1 September 2006, Prosperity entered into a Sale and Purchase Agreement (“SPA”) with GNR whereby Prosperity sold some 1.337 billion shares it held in Abterra to GNR at the price of about S$4.95 million. According to GNR, the sale took place because Prosperity was looking to exit from Abterra and, at the same time, GNR was looking to acquire a controlling interest in a Singapore listed company.

[27] The two material clauses in the SPA which were relevant to the issues before me were clauses 2.1 and 1.1.

[28] Clause 2.1 of the SPA read:

[29] The term “Sale Shares” was defined in clause 1.1 as follows:

[30] At the time of sale under the SPA, Prosperity held 70% of the shares in Abterra. As a result of the sale, Prosperity was left with only 5% of the shares in Abterra, whereas GNR, having bought shares in Abterra from Prosperity as well other sources, now holds over 92% of the shares in Abterra.

[31] Arising from the order made by Kan J in SUM 4903/2009, the Liquidator then commenced the present action in Originating Summons No 726 of 2010 (“OS 726/2010”) on 16 July 2010, naming Prosperity, Abterra and GNR as the first, second and third defendants respectively. In OS 726/2010, the Liquidator sought a declaration that:

(a) on a true and proper construction of clause 8A.5 of the SSA dated 30 August 2004 and amended by the Second Supplementary SSA on 14 March 2005, Prosperity had a present right to call on Abterra to issue the FSS as defined in the SSA; and

(b) the right to call on the FSS did not pass from Prosperity to GNR pursuant to the SPA.

[32] About a year later, on 19 May 2011, the Liquidator applied by way of ex parte summons to amend the Receivership Order in Summons No 2161 of 2011 (“SUM 2161/2011”). It was necessary to first explain the circumstances that led to the amendment application.

[33] In a separate application initiated by Abterra in Originating Summons No 1185 of 2010 to enjoin the Liquidator from using information which came into his possession qua scheme administrator of the Abterra Scheme, Woo Bih Li J remarked during the hearing on 25 March 2011 that the correct plaintiff for OS 726/2010 should perhaps have been the receiver of Prosperity instead.

[34] During the hearing before me, Mr David Chan, counsel for the Receiver (“Mr Chan”), accepted that the locus standi of the proper applicant to claim for the FSS became a “live issue” following the observation by Woo J and that the amendment application was made to address the shortcomings of the Receivership Order. The Receiver in his supporting affidavit explained, inter alia, that the Receivership Order did not expressly empower him to call on Abterra to issue the FSS or to commence proceedings to claim for the FSS.

[35] I found it curious that the amendment application was heard on an ex parte basis. Thereafter I discovered that although the solicitors of Abterra were initially notified of the amendment application by the Registry of the Supreme Court (“the Registry”), following a telephone call from the solicitors for the Liquidator, the Registry subsequently notified Abterra’s solicitors in writing that their attendance was not required “since you are not acting for any party in this matter”.

[36] As I was concerned about the circumstances that eventually resulted in the amendment application being heard on an ex parte basis, I directed the Liquidator’s solicitors to formally explain the circumstances surrounding the telephone call to the Registry. Following their detailed explanation as well as Abterra’s response, I was satisfied that there was nothing improper in the telephone call by the Liquidator’s solicitors. In essence, they explained that they did not believe that the amendment application needed to be served on Abterra since they were not direct parties to S 899/2008 or to the original application that led to the Receivership Order. Indeed, the notification of the amendment application to Abterra’s solicitors was subsequently withdrawn by the Registry on this basis. It was also clear that Abterra’s solicitors were at least aware of the amendment application through the notification from the Registry and therefore could have sought for more information if they were interested to attend the hearing even though the amendment application was never formally served on them.

[37] Having said that, given the contentious background, particularly the acknowledged shortcomings of the Receivership Order and the earlier participation of Abterra and GNR in SUM 4903/2009 before Kan J, the better and prudent course was for the Liquidator’s solicitors to have served the amendment application on all the interested parties including Abterra and GNR so that all relevant arguments could have been adequately ventilated at an earlier stage.

[38] In any event, Prakash J heard the application on an ex parte basis in SUM 2161/2011 and granted the amendments to the Receivership Order sought by the Liquidator (“the Amended Receivership Order”).

[39] Paragraphs 1, 2 and 3 of the Amended Receivership Order read:

[40] It was apparent from the terms of the Amended Receivership Order that the amendments were indeed intended to address the shortcomings as identified in the supporting affidavit filed by the Receiver. Following the Amended Receivership Order, the Receiver took over conduct of OS 726/2010.

[41] The above summary of the material facts provided the backdrop under which the following issues came before me for determination:

(a) First, does the Receiver have the locus standi to bring the present application for the FSS under clause 8A.5 of SSA as it stood amended by the Second Supplementary SSA?

(b) Secondly, if the Receiver had locus standi, whether upon a true and proper construction of clause 8A.5 of the SSA, Prosperity still had the right to claim for the FSS?

(c) Thirdly, if Prosperity still had the right to claim for the FSS, whether the right still remained with Prosperity or had been transferred to GNR pursuant to the SPA?

[42] To succeed in OS 726/2010, Mr Chan accepted that the Receiver had to overcome all three hurdles. Having considered the evidence before me and the respective parties’ submissions, I arrived at the conclusion that the Receiver had failed in all three respects.

[43] Before examining the locus standi issue, it is perhaps useful to understand the nature of a receivership order and, in particular, whether a chose in action could properly be the subject matter of such an order.

[44] A clear exposition of the effect and nature of a receivership order was expounded by Collins LJ in Masri v Consolidated Contractors Int (UK) Ltd (No 2) [2009] 1 QB 450. Collins LJ held (at [52]–[53]) that:

[45] Cotton LJ observed in In re Shephard (1889) 43 Ch D 131 that it might be somewhat confusing to refer to the appointment of a receiver as a form of “equitable execution”. Cotton LJ held (at 135) that:

[46] The power of the court to appoint a receiver is set out under paragraph 5(a) of the First Schedule of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed), which provides as follows:

[47] Here, the “property” over which the Receivership Order was obtained related to an alleged right of the judgment debtor, ie, Prosperity’s right to the FSS under clause 8A.5 of the SSA. It was accepted by all parties that such a right was strictly a chose in action. All parties were also in agreement that a chose in action could legitimately be the subject matter of a receivership order and relied on the same authorities in support of this proposition of law.

[49] Bourne was cited with approval in Maclaine Watson v International Tin Council [1987] 3 WLR 508 (“Maclaine”). Like Bourne, the subject matter of the application for the appointment of a receiver in Maclaine was also a chose in action. In an arbitration to which the International Tin Council (“ITC”) submitted, an award was made against the ITC which it defaulted in paying. Leave of court was subsequently obtained to enforce the award and judgment was accordingly entered. When the judgment remained unsatisfied, the applicant applied to appoint a receiver over the assets of ITC in order to make formal demands in the name of ITC against its member states for contributions in respect of the judgment debt.

[50] As a matter of principle, Millett J held in Maclaine that he had the jurisdiction to appoint a receiver. However, the application was disallowed because Millett J found (at 518E) that the applicant had failed to demonstrate an arguable case that ITC had any cause of action against its member states which was not derived from international treaty, it being accepted that a claim based on an international treaty was not justiciable before the English court.

[51] Having stated the position in law that a chose in action could properly be the subject matter of a receivership order, it is necessary to explain when a chose in action is suitable and appropriate for the appointment of a receiver. Can a receiver be appointed in respect of a disputed chose in action? In this respect, it was also common ground amongst all parties that a receiver could be appointed even if the chose in action was disputed. In both Bourne and Maclaine, the courts held that it was essential for the applicant to show an arguable case (see Maclaine at 513H) or a prima facie case on the merits (see Bourne at 294). On the other hand, it is equally clear that a court would not appoint a receiver if it “was satisfied that the appointment would be fruitless because there was nothing for the receiver to get in” (per Dhillon LJ in Bourne at 302) [emphasis added].

[52] It was common ground amongst all parties that in order for the Receiver to seek declaratory relief under O 15 r 16 of the Rules of Court (Cap 322, R 5, 2006 Rev Ed) (“Rules of Court”), six requirements laid down by the Singapore Court of Appeal in Karaha Bodas Co LLC v Pertamina Energy Trading Ltd and another appeal [2006] 1 SLR(R) 112 (“Karaha Bodas”) must be satisfied. The Court of Appeal in Karaha Bodas held (at [14]) that:

[53] The Receiver’s locus standi was challenged on the fundamental premise that Tan Holdings was not a party to the SSA and that the Amended Receivership Order did not purport to empower the Receiver to commence proceedings in the name of Prosperity who was the relevant party under the SSA to take out the application.

[54] The Court of Appeal in Karaha Bodas held (at [19]) that a plaintiff does not have the standing to seek a declaration regarding the rights of two other parties as opposed to a right which it could claim for itself. In so holding, the Court of Appeal endorsed the approach of Lord Diplock in Gouriet v Union of Post Office Workers [1978] AC 435 at 501 that:

[55] Counsel for the second defendant, Mr Giam Chin Toon SC (“Mr Giam SC”) helpfully referred the court to the English Court of Appeal’s decision of R v Secretary of State for Social Services and another, ex parte Child Poverty Action Group and others [1990] 2 QB 540 (“ex parte CPAG”) for the proposition that the locus standi of an applicant for declaratory relief goes to the jurisdiction of the court and must be satisfied even if it was not contested. In ex parte CPAG, Woolf LJ held at 556 that:

[56] Before me, Mr Chan accepted that the Receiver’s case on locus standi would stand or fall on the Amended Receivership Order dated 24 May 2011. In particular, Mr Chan relied on paragraphs 1, 2 and 3 of the Amended Receivership Order.

[58] The law of receivership is well settled in Singapore. In Lee Kuan Yew v Tang Liang Hong and another and other suits [1997] 1 SLR(R) 328, Lai Kew Chai J held (at [7]) that:

[59] A receiver, as an officer of the court, derives his powers solely from the terms of the court order appointing him. It follows that his powers are defined by the terms of the court order. What the receiver can or cannot do is a matter of construction of the terms of the receivership order. If a receivership order does not specifically empower the receiver to bring an action on behalf of a particular party, it must follow that he has no power to do so.

[60] Under paragraph 1 of the Amended Receivership Order, the Receiver was only empowered to “call on and/or demand and receive the Further Strategic Shares”. The Amended Receivership Order did not expressly empower the Receiver to bring an action on behalf of Prosperity. Given that Prosperity was the first defendant in OS 726/2010, it would have been odd for the Receiver to obtain an order empowering him to proceed in the name of Prosperity against several defendants including Prosperity.

[61] The lack of power on the part of the Receiver to commence proceedings in the name of Prosperity became even clearer when paragraph 2(b) of the Amended Receivership Order was examined. Paragraph 2(b) stated that:

[62] The language used here was plain. Paragraph 2(b) of the Amended Receivership Order only empowered the Receiver to bring an action on behalf of the plaintiff and not on behalf of Prosperity. Consistent with the lack of power to commence OS 726/2010 in the name of Prosperity, the Receiver had instead commenced proceedings in the name of Tan Holdings. Paragraph 3 of the Amended Receivership Order merely empowered the Receiver to receive and sell the FSS and did not assist in addressing the locus standi issue either.

[63] In response to Abterra’s solicitors, the solicitors for the Receiver by letter dated 30 May 2011 stated that the Receiver “is now empowered and does again make a request on behalf of Prosperity” [emphasis added] for the allotment of the FSS and therefore had implicitly recognised that the claim ought to brought in the name of Prosperity. In spite of that, it was puzzling that the Amended Receivership Order only empowered the Receiver to claim in his capacity as Receiver on behalf of the Liquidator of Tan Holdings.

[64] Mr Chan, in his further submissions after delivery of my oral decision, relied on the English Court of Appeal’s decision in Guaranty Trust Company of New York v Hannay & Company [1915] KB 536 (“Guaranty Trust”) at 562 for the proposition that O 15 r 16 allowed “any party who is interested in the subject matter of the declaration” to seek declaratory relief.

[65] In my view, the decision in Guaranty Trust did not advance the Receiver’s case any further on the locus standi issue. That case concerned an application by a plaintiff for a declaration that it was not liable to the defendant in respect of monies paid under a bill of exchange. The objection to the declaration was that the plaintiff had no cause of action and further that it was seeking a declaration that it had no obligation instead of a declaration of a right.

[66] The same passage in Guaranty Trust was in fact considered in Karaha Bodas (at [16]) where the Court of Appeal observed that the plaintiff in Guaranty Trust was “asserting the recognition of a ‘right’ personal to him even if he was not making a ‘claim’ against the defendants in England”. The plaintiff was a United States bank which purchased the bill of exchange which was drawn by the defendant. It was therefore a party to the bill of exchange unlike the present case where Tan Holdings was neither a party to the SSA nor the SPA.

[67] As such, there was no question of Tan Holdings, and consequently the Receiver, asserting any right personal under the SSA or the SPA. Furthermore, in Karaha Bodas, the Court of Appeal also noted the dictum by Pickford LJ in Guaranty Trust that was considered in In re S (Hospital Patient: Court’s Jurisdiction) [1995] Fam 26. It was held in Karaha Bodas (at [16]) that:

[68] In the present context, Tan Holdings was indeed a stranger to both the SSA and the SPA. In my view, the holding in Guaranty Trust as regards “a party having an interest in the subject matter of the declaration” was intended to address the issue that the plaintiff need not have a cause of action against the defendant in seeking declaratory relief. It was not intended to dispense with the overarching requirement to demonstrate locus standi in order to pursue declaratory relief under O 15 r 16.

[69] In my judgment, the Amended Receivership Order failed to adequately address the lack of locus standi on the part of the Receiver to commence OS 726/2010 to claim for the FSS under the SSA. Tan Holdings was not a party to the SSA and had no rights thereunder. On this ground alone, the application failed in limine. However, in case I was wrong on the threshold locus standi issue, I had nonetheless considered the merits of the application.

[70] For completeness, after delivering my oral grounds, I invited all parties to address the court as to whether the Receiver could have validly obtained an order to commence proceedings to claim for the FSS in the name of Prosperity. In this connection, all parties, relying on Bourne and Maclaine, were also in agreement that such an order could in principle have been obtained.

[71] However, parties adopted different positions as to whether such an order would or should have been issued on the specific facts in this case. Mr Giam SC submitted it was not “just and convenient” for the Receiver to have been appointed as Prosperity was in all likelihood insolvent. As such, any disposal or sale of the FSS (believed to be the only known “asset” of Abterra) for the benefit of Tan Holdings would infringe the pari passu distribution rule for all unsecured creditors.

[72] More fundamentally, Mr Giam SC added that given the court’s finding on the lack of merits in the Receiver’s construction of clause 8A.5 of the SSA (which is dealt with below), there would be no purpose in granting an order for the Receiver to claim the FSS in the name of Prosperity. Therefore, while a receiver could be appointed in respect of a disputed chose in action in the sense that the defaulting party has refused to pay without the commencement of court proceedings, such an order should not be made if it is clear that there is no arguable case as was found to be the case in Maclaine.

[73] In the present case, the substantive merits of the application ultimately turned on the true construction of the terms of the SSA and the SPA, both of which could be dealt with summarily given that there was no dispute on the material facts. On that note, I now turn my attention to deal with the construction of the terms of the SSA and the SPA.

[74] The Receiver’s claim for the FSS rested on clause 8A.5 of the SSA.

[75] Clause 8A.5 of the SSA referred to the following four essential terms:

[76] These four terms were defined in Recital (F) of the SSA, which reads:

[77] In my view, clause 8A.5 was to be construed as follows:

(a) First, the Contingent Creditors must become bound to receive the Contingent Conversion Shares.

(b) Second, the obligation of the Contingent Creditors to receive the Contingent Conversion Shares was in discharge of Crystallized Liabilities, ie, the Liabilities must first become crystallized.

(c) Third, Prosperity’s right to request for the FSS would only arise if the Contingent Creditors became bound to receive the Contingent Conversion Shares in the Agreed Period, ie, by 29 August 2007.

[78] Both the Abterra Scheme and the SSA were inextricably linked. In fact, under clause 2.1(c) of the SSA, the rights and obligations of the parties under the SSA were made conditional upon the approval of the Abterra Scheme. Under the Abterra Scheme, crystallization of liabilities occurred when the Contingent Creditors made payment and thereafter upon demand being made against Abterra. I therefore disagreed with Mr Chan that the Contingent Liabilities became crystallized when the Abterra Scheme became effective on or about 17 May 2005.

[79] In support of its claim for the FSS, the Receiver relied on two announcements as described in [21] above under which various Contingent Liabilities became crystallized which led to the allotment of various Contingent Conversion Shares.

[80] The “Agreed Period” of three years from the date of the SSA expired on 29 August 2007. Therefore, save for the 2007 UOB claim, the other Contingent Liabilities had crystallized outside the “Agreed Period”. Prosperity, therefore, had no entitlement to request for the FSS in respect of the 2008 UOB claim, MBB claim and ECICS claim since those claims had crystallized outside the “Agreed Period”.

[81] In an attempt to overcome the above finding, Mr Chan submitted that the reinstatement of the “Agreed Period” to clause 8A.5 in the Second Supplementary SSA was a mere clerical mistake. I disagreed. First, there was no evidence to support such an alleged mistake. None of the parties to the SSA had alleged any mistake. It certainly did not lie in the mouth of a non-party of the SSA to allege such a mistake. Second, given the history behind the various amendments to clause 8A.5, specifically in relation to the “Agreed Period”, it was clear from the objective evidence before me that it was deliberately reintroduced to restrict Prosperity’s entitlement to the FSS provided the Contingent Liabilities became crystallized within the “Agreed Period”.

[82] As regards Mr Chan’s alternative submission that the reference to the “Agreed Period” in clause 8A.5 was superfluous, counsel for the Scheme Administrator, Mr Tan Cheng Han SC (“Mr Tan SC”), raised three succinct and cogent reasons why this could not have been the case:

(a) He first pointed out that although Recital F of the SSA referred to both “Contingent Liabilities” and “Contingent Creditors”, conspicuously, it was not qualified by any reference to the “Agreed Period”. He reasoned that although the “Contingent Creditors” might be bound to receive the “Contingent Conversion Shares” during and after the “Agreed Period”, Prosperity’s rights under clause 8A.5 of the SSA to receive the FSS, on the other hand, was restricted only if the Contingent Creditors became bound to receive the Contingent Conversion Shares within the “Agreed Period”. In other words, the “Agreed Period” only governed the allotment of FSS between Prosperity and Abterra.

(b) Further, Mr Tan SC added that under clause 8A.8 of the SSA, the directors of Abterra who were connected directly or indirectly with Prosperity were required to abstain in any discussion in dealing with the “Contingent Creditors” or “Contingent Liabilities” or “Crystallized Liabilities” because Prosperity’s entitlement to the FSS was dependent on whether and when crystallization of the Contingent Liabilities occurs. It would therefore follow that the reinstatement of the “Agreed Period” in clause 8A.5 was intentional so as to restrict Prosperity’s entitlement to the FSS.

(c) For this reason, it was brought to my attention that of the two allotments, the first allotment of 3,043,800 Contingent Conversion Shares was within the “Agreed Period” while the second and significantly larger allotment for 121,891,311 Contingent Conversion Shares was outside the “Agreed Period”. Consistent with the purpose of reinstating the “Agreed Period” to clause 8A.5, Prosperity’s entitlement to the FSS was in fact restricted by the actual timings in the allotments of the Contingent Conversion Shares.

[83] Further, and more importantly, I find that the purpose of clause 8A.5 was to maintain Prosperity’s 70% shareholding in Abterra and to ensure that such 70% shareholding was not diluted by the issuance of the Contingent Conversion Shares to the Contingent Creditors. This was clear from the ratio of FSS to the Contingent Conversion Shares as stipulated in clause 8A.5 as well as clause 4.2 of the SSA which provided as follows:

[84] Although the 2007 UOB claim was technically within the “Agreed Period”, Prosperity nonetheless had no right to request for the FSS because by the time the 2007 UOB claim became crystallized, Prosperity had already sold 65% of its shares to GNR. The shares were sold by Prosperity to GNR one year prior to the crystallization of the 2007 UOB claim, pursuant to the SPA entered into on 1 September 2006.

[85] For the above reasons, I found that Prosperity was, in any event, not entitled to the FSS under clause 8A.5 of the SSA.

[86] This issue would only arise for determination if Prosperity was found to be entitled to claim for the FSS in spite of the allotment of the Contingent Conversion Shares outside the “Agreed Period” or that Prosperity had since ceased to own 70% of the Abterra shares.

[87] As explained above, 65% of the Abterra shares were sold by Prosperity to GNR pursuant to the SPA on 1 September 2006, one year prior to the expiration of the “Agreed Period”. Was there any compelling reason why the right to the FSS had not been transferred to GNR pursuant to the SPA? In this regard, the Receiver submitted that the right to the FSS was not transferred to GNR since consent had not been obtained from Abterra in breach of clause 10.3 of the SSA which provided as follows:

[88] In my view, such a breach did not affect the validity of the transfer. Furthermore, the breach was for Abterra to object to and I have noted that no such objection was ever raised by Abterra. As was correctly pointed out by counsel for GNR, Mr Chew Kei-Jin, the plaintiff’s lack of locus standi was equally relevant in this context. The Receiver was essentially seeking a declaration on the construction of certain clauses of the SPA, to which Tan Holdings was not a party to.

[89] Nonetheless, under clause 2.1 of the SPA (see [28] above), all the rights, benefits and entitlements attaching to the shares were transferred to GNR upon sale. Such rights, benefits and entitlements clearly included the right to the FSS. It must be right as a matter of construction since the FSS did not exist independently without reference to the shares in Abterra.

[90] There was no merit in Mr Chan’s submission that the right to the FSS could not have been transferred to GNR because there was no evidence that GNR was even aware of the FSS at the time of the sale. The right to the FSS was a contractual right arising from the SPA. Such a right exists as a matter of construction of the terms of the SPA and not upon the subjective knowledge of GNR. On a true construction of clause 2.1 of the SPA, it clearly covered all rights, benefits and entitlements attaching to the shares including the right to the FSS.

[91] In summary, I found that: