Tang Yoke Kheng v Lek Benedict: Directors' Liability for Company Debts under Companies Act s 340(1)

Tang Yoke Kheng (trading as Niklex Supply Co) sued Lek Benedict, Lim Wee Chuan, and Tan Te Teck Gregory in the High Court of Singapore, alleging fraudulent trading under Section 340(1) of the Companies Act. Tang Yoke Kheng claimed that the directors of Amrae Benchuan Trading Pte Ltd, Lek Benedict and Lim Wee Chuan, conducted the company's business with the intent to defraud creditors, particularly Niklex, by transferring assets to related companies. The court, presided over by Andrew Ang JC, dismissed the plaintiff's claim, finding insufficient evidence of intent to defraud creditors.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claim dismissed.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Niklex Supply Co sues directors of Amrae Benchuan for fraudulent trading under s 340(1) of the Companies Act. The court dismissed the claim, finding no intent to defraud creditors.

1.7 Decision Date

26 September 2004

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Tang Yoke Kheng (trading as Niklex Supply Co)	Plaintiff	Individual	Claim Dismissed	Lost	P Suppiah, Elengovan Krishnan
Lek Benedict	Defendant	Individual	Judgment for Defendant	Won	Daniel John, Lim Fung Peen
Lim Wee Chuan	Defendant	Individual	Judgment for Defendant	Won	Daniel John, Lim Fung Peen
Tan Te Teck Gregory	Defendant	Individual	Judgment for Defendant	Won	Daryll Ng, Nicole Tan

3. Judges

Judge Name	Title	Delivered Judgment
Andrew Ang	Judicial Commissioner	Yes

4. Counsels

Counsel Name	Organization
P Suppiah	P Suppiah and Co
Elengovan Krishnan	P Suppiah and Co
Daniel John	John Tan and Chan
Lim Fung Peen	John Tan and Chan
Daryll Ng	Haridass Ho and Partners
Nicole Tan	Haridass Ho and Partners

4. Facts

Plaintiff, Niklex Supply Co, is a creditor of Amrae Benchuan Trading Pte Ltd (the Company), which is now in liquidation.
First and second defendants were directors and shareholders of the Company.
Third defendant was an employee of the Company.
Plaintiff alleged the Company's business was carried on with intent to defraud creditors, breaching s 340(1) of the Companies Act.
Plaintiff alleged the first and second defendants transferred Company assets to related companies to avoid paying Niklex.
The Company sold goods worth $1,268,983.02 to Axum Marketing Pte Ltd between July 2001 and June 2002.
Axum Marketing Pte Ltd paid $713,831.38 to the Company for the goods.

5. Formal Citations

Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and Others (No 2), Suit 864/2003, [2004] SGHC 215

6. Timeline

Date	Event
2003-01-01	Suit filed (Suit 864/2003)
2004-05-17	Expert evidence of Lau Kau Chin filed
2004-08-29	Supplementary affidavit of evidence-in-chief of Lau Kau Chin filed
2004-08-30	Corrective affidavit sworn
2004-09-27	Judgment reserved

7. Legal Issues

Fraudulent Trading
- Outcome: The court found insufficient evidence to prove that the defendants carried on the company's business with intent to defraud creditors.
- Category: Substantive
- Related Cases:
  - [1933] Ch 786
  - [1961] AC 103
  - [1903] 1 Ch 728
  - [1984] QB 675
  - [1979] Ch 592
Conspiracy
- Outcome: The court found no evidence of any conspiratorial agreement or arrangement between the defendants.
- Category: Substantive
- Related Cases:
  - [1995] 1 SLR 17

8. Remedies Sought

Declaration that the defendants are personally liable for the company's debts

9. Cause of Actions

Breach of Section 340(1) of the Companies Act
Conspiracy

10. Practice Areas

Commercial Litigation
Insolvency Law

11. Industries

No industries specified

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
In re Patrick and Lyon, Limited	Chancery Division	Yes	[1933] Ch 786	England and Wales	Cited for the definition of 'defraud' and 'fraudulent purpose' as involving actual dishonesty and moral blame.
Welham v Director of Public Prosecutions	House of Lords	Yes	[1961] AC 103	United Kingdom	Cited for the explanation of the meaning of 'defraud' and the effect on the person who is the object of the fraud.
In re London and Globe Finance Corporation, Limited	Chancery Division	Yes	[1903] 1 Ch 728	England and Wales	Cited for the distinction between 'deceive' and 'defraud', where 'to defraud' is by deceit to induce a course of action.
R v Grantham	Queen's Bench Division	Yes	[1984] QB 675	England and Wales	Cited for the principle that intending to deceive a supplier into believing they will be paid constitutes fraudulent trading.
In re Sarflax Ltd	Chancery Division	Yes	[1979] Ch 592	England and Wales	Cited for the principle that mere preference of one creditor over another does not constitute an intention to defraud.
In re Lloyd’s Furniture Palace, Limited	Chancery Division	Yes	[1925] Ch 853	England and Wales	Cited to show that preference of a debt due to a parent company is no different from preference where the preferred creditor is a director and shareholder.
Re Great Eastern Hotel (Pte) Ltd	High Court	Yes	[1988] SLR 841	Singapore	Cited for the principle that a company is not insolvent until a demand for payment is made and the company fails to pay.
Seagate Technology Pte Ltd v Goh Han Kim	High Court	Yes	[1995] 1 SLR 17	Singapore	Cited for the principle that the essence of a conspiracy is an agreement and that a high degree of proof is required.

13. Applicable Rules

Rule Name
O 40A r 3 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed)

14. Applicable Statutes

Statute Name	Jurisdiction
Section 340(1) Companies Act (Cap 50, 1994 Rev Ed)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Fraudulent trading
Intent to defraud
Companies Act
Liquidation
Running account
Directors' duties
Conspiracy
Insolvency

15.2 Keywords

fraudulent trading
companies act
directors liability
singapore
insolvency

16. Subjects

Companies
Winding up
Tort
Conspiracy

17. Areas of Law

Companies Law
Tort Law
Conspiracy
Fraudulent Trading