Tan Holdings v Prosperity Steel: Receivership, Bonus Shares & Locus Standi
In Tan Holdings Pte Ltd (in creditor’s voluntary liquidation) v Prosperity Steel (Asia) Co Ltd and others, the High Court of Singapore dismissed an application by a receiver, appointed by Tan Holdings, to claim bonus shares in Abterra Limited, a Singapore-listed company, allegedly due to Prosperity Steel. Steven Chong J held that the receiver lacked locus standi because the receivership order did not authorize the action on behalf of Prosperity Steel. The court also found that Prosperity Steel was not entitled to the bonus shares and, if it was, the right had been transferred to General Nice Resources (Hong Kong) Limited. The court dismissed the application with costs.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Application dismissed on the locus standi issue as well as on the merits.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Receiver's application for bonus shares dismissed due to lack of locus standi and failure to prove Prosperity Steel's entitlement or transfer to GNR.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Tan Holdings Pte Ltd (in creditor's voluntary liquidation) | Plaintiff | Corporation | Application Dismissed | Lost | David Chan, Carol Teh |
| Prosperity Steel (Asia) Co Ltd | Defendant | Corporation | Application Dismissed | Won | Giam Chin Toon, Kevin Lim |
| Abterra Limited | Defendant | Corporation | Application Dismissed | Won | Chia Boon Teck, Wong Kai Yun |
| General Nice Resources (Hong Kong) Limited | Defendant | Corporation | Application Dismissed | Won | Chew Kei-Jin |
| Scheme Manager of Abterra Limited | Other | Individual | Neutral | Neutral | Tan Cheng Han, Charmaine Kong |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Steven Chong | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| David Chan | Shook Lin & Bok LLP |
| Carol Teh | Shook Lin & Bok LLP |
| Giam Chin Toon | Wee Swee Teow & Co |
| Kevin Lim | Wee Swee Teow & Co |
| Chia Boon Teck | Chia Wong LLP |
| Wong Kai Yun | Chia Wong LLP |
| Tan Cheng Han | TSMP Law Corporation |
| Charmaine Kong | TSMP Law Corporation |
| Chew Kei-Jin | Tan Rajah & Cheah |
4. Facts
- Tan Holdings was placed under insolvent voluntary liquidation on 20 June 2006.
- Prosperity entered into a Strategic Subscription and New Business Agreement with Abterra in 2004.
- Prosperity sold 65% of its shares in Abterra to GNR on 1 September 2006.
- A Loan Agreement was signed between Tan Holdings, Prosperity and Bumiputra Commerce Bank Berhad on 20 January 2005.
- Default judgment was obtained by the liquidator of Tan Holdings against Prosperity on 27 February 2009.
- The Receiver was appointed to receive profits and moneys receivable in respect of Prosperity’s interest in the FSS under the SSA.
- The 'Agreed Period' in clause 8A.5 of the SSA expired on 29 August 2007.
5. Formal Citations
- Tan Holdings Pte Ltd (in creditor’s voluntary liquidation) v Prosperity Steel (Asia) Co Ltd and others, Originating Summons No 726 of 2010, [2011] SGHC 219
6. Timeline
| Date | Event |
|---|---|
| Strategic Subscription and New Business Agreement signed between Prosperity and Abterra. | |
| Abterra Scheme sanctioned by court order. | |
| Loan and Assignment Agreement signed between Tan Holdings, Prosperity and Bumiputra Commerce Bank Berhad. | |
| Tan Holdings placed under insolvent voluntary liquidation. | |
| Sale and Purchase Agreement signed between Prosperity and GNR. | |
| Suit No 899 of 2008 commenced by the liquidator of Tan Holdings against Prosperity. | |
| Default judgment obtained by the liquidator against Prosperity. | |
| Receivership Order obtained by the Liquidator. | |
| Originating Summons No 726 of 2010 commenced by the Liquidator. | |
| Amended Receivership Order granted. | |
| Judgment issued. |
7. Legal Issues
- Locus Standi
- Outcome: The court held that the Receiver lacked locus standi to bring the application.
- Category: Procedural
- Sub-Issues:
- Receiver's authority to bring action
- Party's interest in subject matter
- Construction of Contractual Clauses
- Outcome: The court construed clause 8A.5 of the SSA and found that Prosperity no longer had the right to claim for the FSS.
- Category: Substantive
- Sub-Issues:
- Interpretation of 'Agreed Period'
- Meaning of 'Contingent Liabilities'
- Transfer of rights under SPA
- Transfer of Contractual Rights
- Outcome: The court held that the right to the FSS, if any, had been transferred from Prosperity to GNR under the SPA.
- Category: Substantive
- Sub-Issues:
- Validity of transfer without consent
- Scope of rights transferred under SPA
8. Remedies Sought
- Declaratory Relief
9. Cause of Actions
- Breach of Contract
10. Practice Areas
- Commercial Litigation
- Insolvency Law
11. Industries
- Finance
- Steel
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Masri v Consolidated Contractors Int (UK) Ltd (No 2) | English Court of Appeal | Yes | [2009] 1 QB 450 | England and Wales | Cited for the exposition of the effect and nature of a receivership order and that the appointment does not have a proprietary effect. |
| In re Sartoris’s Estate | Not Available | Yes | [1892] 1 Ch 11 | England and Wales | Cited for the principle that a receivership order operates as an injunction restraining the defendant from getting in money which the receiver is appointed to receive. |
| Stevens v Hutchinson | Not Available | Yes | [1953] 1 Ch 299 | England and Wales | Cited for the principle that a receivership order operates as an injunction restraining the defendant from getting in money which the receiver is appointed to receive. |
| In re Potts | Not Available | Yes | [1893] 1 QB 648 | England and Wales | Cited for the principle that the judgment creditor receives no interest in the received property until it is transferred to him in satisfaction of the judgment debt. |
| In re Shephard | Not Available | Yes | (1889) 43 Ch D 131 | England and Wales | Cited to highlight the potential confusion arising from the term 'equitable execution' and to clarify that it is equitable relief granted when there is no remedy by execution at law. |
| Bourne v Colodense Ltd | Not Available | Yes | [1985] ICR 291 | England and Wales | Cited as an example where a receiver was appointed by way of equitable execution for liberty to commence proceedings in the name of the plaintiff to claim an indemnity against a trade union. |
| Maclaine Watson v International Tin Council | Not Available | Yes | [1987] 3 WLR 508 | England and Wales | Cited as an example where a receiver was sought to be appointed 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. |
| Karaha Bodas Co LLC v Pertamina Energy Trading Ltd and another appeal | Singapore Court of Appeal | Yes | [2006] 1 SLR(R) 112 | Singapore | Cited for the six requirements that must be satisfied before the court grants declaratory relief. |
| Gouriet v Union of Post Office Workers | House of Lords | Yes | [1978] AC 435 | England and Wales | Cited for the principle that the jurisdiction of the court to make declarations of rights was confined to declaring contested legal rights of the parties represented in the litigation. |
| R v Secretary of State for Social Services and another, ex parte Child Poverty Action Group and others | English Court of Appeal | Yes | [1990] 2 QB 540 | England and Wales | Cited 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. |
| Lee Kuan Yew v Tang Liang Hong and another and other suits | High Court | Yes | [1997] 1 SLR(R) 328 | Singapore | Cited for the principle that a receiver derives his powers from the terms of the order appointing him. |
| Guaranty Trust Company of New York v Hannay & Company | English Court of Appeal | Yes | [1915] KB 536 | England and Wales | Cited 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, but distinguished in the present case. |
| In re S (Hospital Patient: Court’s Jurisdiction) | Not Available | Yes | [1995] Fam 26 | England and Wales | Cited in relation to the interpretation of Guaranty Trust Company of New York v Hannay & Company. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 15 r 16 |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) section 290 | Singapore |
| Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed), First Schedule paragraph 5(a) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Further Strategic Shares
- Strategic Subscription and New Business Agreement
- Receivership Order
- Agreed Period
- Contingent Conversion Shares
- Crystallized Liabilities
- Sale and Purchase Agreement
- Locus Standi
- Scheme of Arrangement
15.2 Keywords
- receivership
- bonus shares
- locus standi
- contract construction
- strategic subscription agreement
- sale and purchase agreement
- insolvency
- liquidation
16. Subjects
- Receivership
- Contract Law
- Company Law
- Civil Procedure
- Insolvency
17. Areas of Law
- Receivership
- Contract Law
- Company Law
- Civil Procedure