Centaurea International Pte Ltd v Citus Trading Pte Ltd: Validation of Payments under Companies Act s 259

In Centaurea International Pte Ltd (in liquidation) v Citus Trading Pte Ltd, the Singapore High Court addressed the validation of payments made by Centaurea International to Citus Trading after the commencement of winding up proceedings. The liquidators sought to recover payments made after the winding up commenced, while Citus Trading sought to validate them under Section 259 of the Companies Act. The court validated the payments, dismissing the liquidators' application and ordering costs against them.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

The payments to the defendant are validated and the liquidators’ application is dismissed with costs.

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court case regarding the validation of payments made by Centaurea International to Citus Trading after winding up commenced. The court validated the payments.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Centaurea International Pte Ltd (in liquidation)PlaintiffCorporationApplication DismissedLost
Citus Trading Pte LtdDefendantCorporationPayments ValidatedWon

3. Judges

Judge NameTitleDelivered Judgment
Steven ChongJudgeYes

4. Counsels

Counsel NameOrganization
Edgar Chin Ren HoweIncisive Law LLC
Samantha Ch’ngIncisive Law LLC
Jonathan ThioIncisive Law LLC
Mary-Anne ChuaJoseph Tan Jude Benny LLP
Jude BennyJoseph Tan Jude Benny LLP

4. Facts

  1. Centaurea International Pte Ltd (in liquidation) was in the business of supplying bunkers to vessels.
  2. Citus Trading Pte Ltd is an international trader dealing in commodities including crude oil, petroleum distillates and petrochemicals.
  3. Centaurea International Pte Ltd purchased bunkers from oil traders including Citus Trading Pte Ltd to supply them to vessels.
  4. Navig8 Pool Inc commenced winding up proceedings against Centaurea International Pte Ltd on 1 July 2013.
  5. Centaurea International Pte Ltd made five payments totaling US$1,526,803.53 to Citus Trading Pte Ltd between 5 to 31 July 2013.
  6. The payments were in settlement of various pre-liquidation invoices.
  7. Citus Trading Pte Ltd continued to supply bunkers to Centaurea International Pte Ltd after receiving the payments.

5. Formal Citations

  1. Centaurea International Pte Ltd v Citus Trading Pte Ltd, Originating Summons No 637 of 2016, [2016] SGHC 264

6. Timeline

DateEvent
Personal guarantee issued by Lim Tiong Ling
Mortgage over MT Sirima 1 issued
Winding up proceedings commenced by Navig8 Pool Inc
Winding up proceedings advertised
Cheque payment of US$200,000 made
Cheque payment of US$300,000 made
Cheque payment of US$97,800 made
Invoice CIT 230092 issued for US$309,946
Cash payment of US$309,563 made by Lim
Cash payment of US$479,003.53 made
Invoice CIT 230096 issued for US$412,650
Cheque payment of US$450,000 made
Invoice CIT 230100 issued for US$32,709.39
Plaintiff wound up
Defendant learned Lim had absconded
ACRA search revealed liquidators appointed
Defendant transferred ownership of Sirima 1 to itself
Statutory notice issued against Lim
Bankruptcy proceedings commenced against Lim
Lim adjudged bankrupt
Judgment reserved

7. Legal Issues

  1. Avoidance of Transactions
    • Outcome: The court validated the payments made to the defendant.
    • Category: Substantive
    • Sub-Issues:
      • Disposition of property after commencement of insolvency proceedings
      • Validation of payments made after commencement of winding up
  2. Retrospective Validation
    • Outcome: The court held that the relevant time for the inquiry is the time of the payment, focusing on the prospective advantage to the plaintiff and the general body of creditors.
    • Category: Procedural
    • Sub-Issues:
      • Time of inquiry for validation
      • Benefit to creditors

8. Remedies Sought

  1. Declaration that payments are void

9. Cause of Actions

  • Application to declare payments void under Section 259 of the Companies Act

10. Practice Areas

  • Liquidation
  • Commercial Litigation

11. Industries

  • Shipping
  • Commodities Trading

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
In re Gray’s Inn Construction Co LtdN/AYes[1980] 1 WLR 711N/ACited for the principle that the court should not validate transactions that result in preferential payments to pre-liquidation creditors at the expense of other creditors.
Express Electrical Distributors Ltd v Beavis and orsN/AYes[2016] EWCA Civ 765N/ACited to clarify that good faith, ordinary course of business, and lack of notice are not sufficient for validation without a more searching inquiry into the overall interest of the transaction.
Denny v John Hudson & Co LtdN/AYes[1992] BCLC 901N/ACited to support the view that good faith alone is not enough to justify validation and that the crucial requirement is whether there are special circumstances making such a course desirable in the interest of the unsecured creditors as a body.
Re J Leslie Engineers Co LtdN/AYes[1976] 2 All ER 85N/ACited to emphasize that while the absence of actual knowledge of a winding up petition is a powerful factor, it is not conclusive, and the court must consider the purpose of ensuring creditors are paid pari passu.
Jardio Holdings Pty Ltd v Dorcon Construction Pty LtdN/AYes(1984) 2 ACLC 574N/ACited for the principle that knowledge of a company’s financial embarrassment or insolvency is not necessarily fatal to an application for validation and that the merits should be tested at the date of entry into the transaction.
Tellsa Furniture Pty Ltd v Glendave Nominees Pty LtdN/AYes(1987) 12 ACLR 64N/ACited to support the defendant’s position that the court should assess whether, at the time of the payment, the impugned transaction was likely to benefit the creditors.
Advanced EPI Technology Corporation v Vitelic (Hong Kong) Ltd and othersN/AYes[2007] HKCFI 896N/ACited to illustrate that whether or not payments did in fact benefit the company may be determined by extraneous circumstances beyond the control of the parties.
Rose v AIB Group (UK) plc and anorN/AYes[2003] EWHC 1737 (Ch)N/ACited for the proposition that advertisement of the winding up petition is notice to all the world of its presentation.
Re a Company (No 007523 of 1986)N/AYesRe a Company (No 007523 of 1986) [1987] BCLC 200N/ACited as an example of a case where a prospective validation order to allow a company to continue trading was refused because there were serious doubts as to the company’s solvency and because it had not been trading profitably.
Fuji Photo Film Co Ltd v Jazz Photo (Hong Kong) LtdN/AYes[2004] HKCFI 19N/ACited as an example of a case where the court declined to prospectively validate expenses for business trips to meet clients and attend camera and photography exhibitions.
Prospect Electricity v Advanced Glass Technologies of Australia P/LN/AYes(1996) 22 ACSR 6N/ACited to support the validation of the payment of pre-liquidation electricity bills in order for the company to continue receiving electricity supply to stay in business.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 259Singapore
UK Insolvency Act 1986 (c 45) s 127United Kingdom

15. Key Terms and Keywords

15.1 Key Terms

  • Winding up
  • Liquidation
  • Validation order
  • Disposition of property
  • Pari passu rule
  • Credit limit
  • Personal guarantee
  • Vessel mortgage
  • Bunkers
  • Insolvency

15.2 Keywords

  • winding up
  • liquidation
  • validation
  • payments
  • companies act
  • insolvency

17. Areas of Law

Area NameRelevance Score
Insolvency Law95
Avoidance of transfer90
Winding Up Proceedings80
Company Law60
Property Law40
Contract Law30

16. Subjects

  • Insolvency
  • Company Law
  • Commercial Law