Liquidators of Progen Engineering v Progen Holdings: Unfair Preference Claim

The liquidators of Progen Engineering Pte Ltd brought a claim against Progen Holdings Ltd in the High Court of Singapore, alleging unfair preference under s 99(2) of the Bankruptcy Act read with s 329(1) of the Companies Act. The liquidators sought repayment of certain sums paid by Progen Engineering to Progen Holdings within two years before the winding-up application. Woo Bih Li J dismissed the liquidators' claim, finding that the transactions in question did not constitute unfair preferences.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Claim dismissed

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Liquidators of Progen Engineering sought repayment from Progen Holdings, alleging unfair preference. The court dismissed the claim, finding no unfair preference.

1.7 Decision Date

22 December 2009

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
Progen Holdings Ltd	Defendant	Corporation	Claim Dismissed	Won	Philip Fong of Harry Elias Partnership Shazana Anuar of Harry Elias Partnership
Liquidators of Progen Engineering Pte Ltd	Plaintiff	Other	Claim Dismissed	Lost	Lee Eng Beng of Rajah & Tann LLP Jonathan Lee of Rajah & Tann LLP Nigel Pereira of Rajah & Tann LLP

3. Judges

Judge Name	Title	Delivered Judgment
Woo Bih Li	Judge	Yes

4. Counsels

Counsel Name	Organization
Philip Fong	Harry Elias Partnership
Shazana Anuar	Harry Elias Partnership
Lee Eng Beng	Rajah & Tann LLP
Jonathan Lee	Rajah & Tann LLP
Nigel Pereira	Rajah & Tann LLP

4. Facts

Progen Holdings Ltd is the sole shareholder and holding company of Progen Engineering Pte Ltd.
A winding-up application was filed against Progen Engineering on 22 January 2007.
Progen Engineering was wound up on 16 February 2007.
The liquidators claimed that certain payments made by Progen Engineering to Progen Holdings constituted unfair preferences.
The payments were made within two years before the date of commencement of winding-up.
Progen Engineering was insolvent in the two years before the winding-up application.
The directors of both Progen Engineering and Progen Holdings had common directors.

5. Formal Citations

Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd, OS 1433/2008, [2009] SGHC 286

6. Timeline

Date	Event
1998-11-01	Arbitration proceedings commenced by Uni-Sanitary against Progen Engineering
1999-01-01	Arbitration proceedings commenced by Winter Engineering against Progen Engineering
2004-07-02	Circular stating that Progen Building was to be sold for $24.8 million
2004-07-29	Sale of Progen Building completed
2004-08-03	PPL placed $25 million in a fixed deposit account with United Overseas Bank Limited
2004-08-06	Progen Holdings announced that cash and FDs amounted to about $31.1 million as at 31 July 2004
2004-08-26	Progen Holdings announced its proposal to pay a special dividend of about $4 million and a capital distribution of about $11 million
2004-11-24	Shareholders’ approval obtained for the payments of the special dividend and the capital distribution
2004-11-26	Arbitration award in favour of Winter Engineering
2004-12-04	PPL’s FD with UOB matured
2004-12-04	$19 million placed in an FD account held by Progen Engineering with MBB
2004-12-04	Progen Engineering received $19.3 million
2004-12-09	A sum of $3,970,916.73 was transferred from the remaining balance of the UOB FD to CDP to effect the payment of the special dividend
2005-01-10	Court approved the capital distribution
2005-01-11	Copy of the court order lodged with the Accounting and Corporate Regulatory Authority of Singapore
2005-01-31	Salaries, etc payment of $92,994.50
2005-02-04	$10,987,960.85 was transferred to CDP to effect the capital distribution to shareholders of the Defendant
2005-02-21	Purchases of iron ore payment of $50,000.00
2005-02-28	Capital distribution to PHL’s shareholders payment of $10,987,960.85
2005-02-28	Salaries, etc payment of $57,837.00
2005-03-04	Purchases of iron ore payment of $55,000.00
2005-03-31	Salaries, etc payment of $48,956.75
2005-04-30	Salaries, etc payment of $48,607.00
2005-05-25	Uni-Sanitary received an award for $628,791.75
2005-05-31	Salaries, etc payment of $48,617.62
2005-06-30	Salaries, etc payment of $50,131.29
2005-06-30	Set-off payment of $7,538,243.15
2007-01-22	Winding-up application filed against Progen Engineering
2007-02-16	Progen Engineering wound up by court order
2008-11-06	Liquidators filed Originating Summons No 1433 of 2008
2009-01-09	ELTICI Consulting Pte Ltd issued report
2009-12-23	Judgment issued

7. Legal Issues

Unfair Preference
- Outcome: The court held that the payments in question did not constitute unfair preferences.
- Category: Substantive
- Sub-Issues:
  - Desire to improve creditor's position
  - Rebuttal of presumption of unfair preference
- Related Cases:
  - [2002] 4 SLR 145
  - [2006] 4 SLR 969

8. Remedies Sought

Repayment of funds

9. Cause of Actions

Avoidance of transactions
Unfair preference

10. Practice Areas

Insolvency Litigation
Commercial Litigation

11. Industries

Engineering
Finance

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Show Theatres Pte Ltd (in liquidation) v Shaw Theatres Pte Ltd & another	Court of Appeal	Yes	[2002] 4 SLR 145	Singapore	Cited regarding the issue of whether the recipient of the payment was a person connected with the insolvent paying company.
Amrae Benchuan Trading Pte Ltd v Tan Te Teck Gregory	High Court	Yes	[2006] 4 SLR 969	Singapore	Cited for the principles to be applied when considering whether a transaction may be successfully challenged as an undue preference.
Re Libra Industries Pte Ltd	High Court	Yes	[2000] 1 SLR 84	Singapore	Cited for the application of s 329 of the Companies Act to the avoidance of undue preferences, following Re MC Bacon Ltd.
Re MC Bacon Ltd	Not Available	Yes	[1990] BCLC 324	United Kingdom	Cited for the changes introduced to insolvency law regarding the intention and desire to prefer a creditor.
Wills v Corfe Joinery Ltd	Not Available	Yes	[1998] 2 BCLC 75	United Kingdom	Cited regarding the burden of proof on the recipient of a payment to rebut the presumption of influence by the relevant desire.
Soh Gim Chuan v Koh Hai Keong	High Court	Yes	[2002] 4 SLR 212	Singapore	Cited for a similar approach to determining whether a transaction may be challenged as an undue preference.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Bankruptcy Act (Cap 20, 2000 Rev Ed)	Singapore
Companies Act (Cap 50, 2006 Rev Ed)	Singapore
Companies Act (Cap 50, 1994 Rev Ed)	Singapore
Bankruptcy Act	Singapore
Bankruptcy Act	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Unfair preference
Winding-up
Insolvency
Liquidators
Capital distribution
Set-off
Subordination Statement
Related party
Associate
Going concern basis

15.2 Keywords

Unfair preference
Insolvency
Winding up
Bankruptcy Act
Companies Act
Progen Engineering
Progen Holdings
Liquidators

17. Areas of Law

Area Name	Relevance Score
Insolvency Law	90
Unfair preferences	90
Liquidation	80
Avoidance of transfer	70
Company Law	50
Bankruptcy	40

16. Subjects

Insolvency
Unfair Preference
Corporate Law