In Singapore, applications to remove liquidators are relatively uncommon and cases which have succeeded are even rarer. Applicants typically have to show that the removal of the liquidators is “in the real, substantial and honest interest of the liquidation” and will “advance the purposes for which the liquidator was appointed”: see Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2018] 3 SLR 687 (Petroships); section 174 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). In this case update, we take the opportunity to discuss a recent application of this principle in Ace Class Precision Engineering Pte Ltd (in members’ voluntary liquidation) v Tan Boon Hwa and ors and other matters [2021] SGHC 134 (ACP).
The companies in question (the Companies) were incorporated to undertake subcontract work exclusively for one Yangbum Engineering Pte Ltd (Yangbum). One Mr Loong Soo Min (Mr Loong) was a shareholder-director of Yangbum. He also claimed to be a beneficial owner of the Companies, which was the subject of separate proceedings in HC/S 345/2020 (S 345).
The Companies were subsequently placed under a members’ voluntary liquidation (MVL), and liquidators were appointed (the Liquidators). Yangbum was the most significant creditor of each of the Companies, and submitted proofs of debt totalling at around SGD 10.8 million. At the time of the hearing, the Liquidators had not adjudicated these proofs of debt.
Yangbum and Mr Loong (the Applicants) applied to remove the Liquidators pursuant to section 302 of the Companies Act (now section 174 of IRDA). They made several allegations, all of which impugn the Liquidators’ impartiality. The Liquidators argued that Yangbum and Mr Loong had no standing to make such an application, and that there was no actual or perceived bias.
Before proceeding with showing cause for the removal of the Liquidators, the Applicants had to show that they had standing to even bring the application. In this regard:
The SGHC proceeded to find that Yangbum failed to show that the removal of the Liquidators was “in the real, substantial and honest interest of the liquidation” and would “advance the purposes for which the liquidator was appointed”:
It was not the law that a liquidator could not have had any prior contact with the company or its directors or officers. It was commonplace for a company to seek professional advice with respect to actual or apprehended insolvency, often from someone who later accepted appointment as the company’s liquidator. Hence, there would be “an air of commercial unreality about any suggestion that this course of events is necessarily improper” (Irving at 177). Indeed, creditors were frequently well served by the appointment of a liquidator with some familiarity with the affairs of the company, provided that the reasons leading to this familiarity did not give rise to an apprehension of lack of impartiality or reflect an actual or perceived conflict.”
Ultimately, this is a fact sensitive inquiry, and "“mere professional acquaintanceship” and “professional connections of a passing nature” would not create actual bias or a reasonable perception of bias” but “[i]ntimate relationships of long standing” likely would (Irving at 176).”2
The SGHC also found that the Liquidators’ removal would create further costs, delay and disruption in the liquidation process of the Companies. Such removal would also cast an unwarranted shadow over the Liquidators’ professional standing and reputation, especially since the allegations impugned the Liquidators’ impartiality.
Even though this case involved an MVL, it is a good illustration on some of the evidential difficulties on showing cause to remove liquidators, and highlights some of the relevant factors. Allegations of bias (in any context) are generally difficult to prove, and strong evidence should be obtained before making such allegations. For example, as per the decision in Petroships, the applicant may try to obtain evidence to show that the liquidator’s decision not to investigate the affairs of the company is arbitrary or without basis, or that it had been made to further his personal interest or to protect the interests of one faction of the members or creditors in preference to those of another.
If creditors or any persons with sufficient standing are unhappy with the liquidators in any way, it is always more prudent to try and work with the liquidators first before considering any removal application which will invariably have a bearing on the reputation of the liquidator.
If you have any questions on the operation of IRDA or any issue related to restructuring, insolvency and bankruptcy, please feel free to contact us.
1. [125(a)] of the judgment
2. [125(b)] of the judgment
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