Prima Bulkship v Lim Say Wan: Directors' Duties & Breach in Creditors' Voluntary Liquidation
In Prima Bulkship Pte Ltd (in creditors’ voluntary liquidation) v Lim Say Wan, the High Court of Singapore heard a case brought by the liquidators of Prima Bulkship Pte Ltd and Star Bulkship Pte Ltd against Lim Say Wan and Beh Thiam Hock, the directors, for breach of directors’ duties. The liquidators alleged that the companies suffered losses due to the directors' negligence in relation to the purchase of vessels. The court dismissed the suit, finding that the directors did not breach their duties and that their actions did not cause the alleged losses.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Suit dismissed.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Prima Bulkship sues Lim Say Wan for breach of director's duties. The court dismissed the suit, finding no breach or causation of loss.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Prima Bulkship Pte Ltd (in creditors’ voluntary liquidation) | Plaintiff | Corporation | Claim Dismissed | Lost | |
| Star Bulkship Pte Ltd (in creditors’ voluntary liquidation) | Plaintiff | Corporation | Claim Dismissed | Lost | |
| Lim Say Wan | Defendant | Individual | Judgment for Defendant | Won | |
| Beh Thiam Hock | Defendant | Individual | Judgment for Defendant | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Kannan Ramesh | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- Prima and Star were special purpose vehicles with S$2 paid-up capital.
- Lim and Beh were appointed as nominee directors of Prima and Star respectively.
- The companies entered into MOAs to purchase vessels for US$34m each.
- The companies were required to make a deposit of US$3.4m each.
- The companies did not have sufficient funds to pay the deposits.
- The POA Holders decided not to proceed with the MOAs due to concerns over the financial standing of the Sellers and the risk of arrest of the vessels.
- The Sellers commenced arbitration proceedings against the companies for breach of contract.
5. Formal Citations
- Prima Bulkship Pte Ltd (in creditors’ voluntary liquidation) and anothervLim Say Wan and another, Suit No 911 of 2014, [2016] SGHC 283
6. Timeline
| Date | Event |
|---|---|
| Prima Bulkship Pte Ltd incorporated | |
| Sonic Finance Inc and Mirage Finance Inc entered into negotiations with purchasers for sale of vessels | |
| Star Bulkship Pte Ltd incorporated | |
| JTJB approached Lim with a view to appointing two local nominee directors for Prima and Star | |
| Lim and Beh appointed as directors of Prima and Star respectively | |
| Memorandum of Agreement entered into between Sonic and Prima for purchase of Sunray | |
| Memorandum of Agreement entered into between Mirage and Star for purchase of Moonray | |
| Halim and Hisham are directors of RP Capital | |
| Tripartite Agreements entered into | |
| Moonray arrested in New Orleans, USA | |
| Tripartite Agreements entered into | |
| Companies opened bank accounts with Credit Suisse AG, Singapore | |
| Deposits due | |
| POA Holders informed that Moonray had been arrested | |
| Moonray released | |
| Sellers sought confirmation from POA Holders and JTJB that Deposits would be paid by 9 August 2010 | |
| Confirmation of deposit payment not received | |
| Sellers commenced arbitration proceedings in London against the Companies | |
| Balance sheet and profit and loss account of Prima and Star | |
| Companies placed in creditors’ voluntary liquidation | |
| Mr Yam appointed the liquidator of the Companies | |
| Companies purportedly dissolved by Mr Yam | |
| Arbitral tribunal issued an Award on the preliminary issue in each of the Arbitrations | |
| Sellers commenced applications in the High Court against Mr Yam and the respective Companies for a declaration that the purported dissolutions by Mr Yam were void | |
| High Court made orders declaring that the purported dissolution of each of the Companies was void | |
| High Court made orders restoring each of the Companies into creditors’ voluntary liquidation | |
| High Court made orders removing Mr Yam as liquidator of each of the Companies | |
| High Court made orders appointing Mr Tam Chee Cheong and Mr Andrew Grimmett as liquidators of each of the Companies | |
| Mr Grimmett and his solicitors held interviews with the Defendant Directors and their then solicitors | |
| Mr Grimmett and his solicitors held interviews with the Defendant Directors and their then solicitors | |
| Liquidators brought the present action against the Defendant Directors | |
| Judgment reserved |
7. Legal Issues
- Breach of Directors' Duties
- Outcome: The court found that the directors did not breach their duties.
- Category: Substantive
- Sub-Issues:
- Failure to exercise care, skill, and diligence
- Failure to avoid conflicts of interest
- Failure to act in good faith
- Failure to act for proper purposes
- Causation of Loss
- Outcome: The court found that even if there was a breach of duty, it did not cause the alleged losses.
- Category: Substantive
- Duties to Creditors
- Outcome: The court found that the directors did not breach their duties to creditors.
- Category: Substantive
8. Remedies Sought
- Monetary Damages
9. Cause of Actions
- Breach of Directors' Duties
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- Shipping
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Vita Health Laboratories Pte Ltd and others v Pang Seng Meng | Singapore Court of Appeal | Yes | [2004] 4 SLR(R) 162 | Singapore | Cited for the principle that a director is entitled to delegate the performance of certain tasks to subordinates, professionals or experts he reasonably believes will competently discharge their duties in the company’s interests. |
| Lim Weng Kee v Public Prosecutor | Singapore High Court | Yes | [2002] 2 SLR(R) 848 | Singapore | Cited for the principle that the standard of care and diligence owed by a director is not fixed and is a continuum depending on various factors. |
| Ho Kang Peng v Scintronix Corp Ltd (formerly known as TTL Holdings Ltd | Singapore High Court | Yes | [2014] 3 SLR 329 | Singapore | Cited for the principle that the standard of care and diligence owed by a director is not fixed and is a continuum depending on various factors. |
| Davidson v Smith | Supreme Court of New South Wales | Yes | (1989) 15 ACLR 732 | Australia | Cited for the principle that directors must not fetter their powers by contract with or promises to other persons. |
| Boulting v Association of Cinematograph Television and Allied Technicians | Queen's Bench | Yes | [1963] 2 QB 606 | England and Wales | Cited for the principle that no one, who has duties of a fiduciary nature to discharge, can be allowed to enter into an engagement by which he binds himself to disregard those duties or to act inconsistently with them. |
| W&P Piling Pte Ltd (in liquidation) v Chew Yin What and others | Singapore High Court | Yes | [2007] 4 SLR(R) 218 | Singapore | Cited for the principle that nominee directors owe the same duties to a company as any other director. |
| Re London Citylink Ltd and another; Secretary of State for Trade and Industry v London Citylink Ltd and another | English High Court | No | [2005] EWHC 2875 (Ch) | England and Wales | Cited to argue that the Defendant Directors were obliged to supervise and/or monitor the POA Holders. |
| Sheahan (as liquidator of SA Service Stations (In Liq)) and another v Verco and another | Supreme Court of South Australia | No | (2001) 37 ACSR 117 | Australia | Cited to argue that the Defendant Directors were obliged to supervise and/or monitor the POA Holders. |
| Then Khek Koon v Arjun Permanand Samtani | Singapore Court of Appeal | Yes | [2014] 1 SLR 245 | Singapore | Cited for the principle that whether a loss may be recovered due to a director’s breach of his duties of skill and care is subject to the common law rules of causation. |
| Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd | Singapore Court of Appeal | Yes | [2010] 4 SLR 1089 | Singapore | Cited for the principle that when a company is insolvent, or even in a parlous financial position, directors have a fiduciary duty to take into account the interests of the company’s creditors when making decisions for the company. |
| Dynasty Line Ltd (in liquidation) v Sukamto Sia and another and another appeal | Singapore Court of Appeal | Yes | [2014] 3 SLR 277 | Singapore | Cited for the principle that when assessing a company’s solvency for the purpose of determining whether its directors have breached their fiduciary duties, the inquiry requires a broader assessment of the surrounding circumstances of the case. |
| Living the Link Pte Ltd (in creditors’ voluntary liquidation) and others v Tan Lay Tin Tina and others | Singapore High Court | Yes | [2016] 3 SLR 621 | Singapore | Cited for the principle that in considering whether a company which was entirely dependent on the cash flow made available by its shareholder was “cash flow” insolvent, the court refused to consider the past financial support extended by the shareholder, especially as the shareholder was never obliged to provide this support. |
| Re Wait Investment Ltd (In Liquidation) | High Court of Auckland | No | [1997] 3 NZLR 96 | New Zealand | Cited to argue that the Defendant Directors’ duty to take into account the interests of the creditors obliged them to either arrange for financing, make inquiries on financing or not proceed without financing. |
| Stocznia Gdanska SA v Latvian Shipping Co and others (No 3) | English Court of Appeal | No | [2002] All ER (Comm) 768 | England and Wales | Cited to argue that the Defendant Directors’ duty to take into account the interests of the creditors obliged them to either arrange for financing, make inquiries on financing or not proceed without financing. |
| Colin Gwyer & Associates Ltd and another v London Wharf (Limehouse) Ltd and others | English High Court | No | [2002] EWHC 2748 (Ch) | England and Wales | Cited to argue that the Defendant Directors’ duty to take into account the interests of the creditors obliged them to either arrange for financing, make inquiries on financing or not proceed without financing. |
| Australian Securities and Investments Commission v Macro Realty Developments Pty Ltd (ACN 159 678 930) and Others | Federal Court of Australia | No | [2016] 111 ACSR 638 | Australia | Cited to argue that the NDI Agreements constitutes an impermissible fetter on the Defendant Directors’ powers and discretion. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| s 157 of the Companies Act | Singapore |
| s 391 of the Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Directors' duties
- Nominee director
- Creditors’ voluntary liquidation
- Memorandum of Agreement
- Special purpose vehicle
- Power of Attorney Holders
- Breach of contract
- Arbitration
- Insolvency
- Duties of care, skill and diligence
15.2 Keywords
- Directors' duties
- Breach of duty
- Insolvency
- Liquidation
- Shipping
- Singapore
- Company law
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Director's Duties | 95 |
| Company Law | 75 |
| Insolvency Law | 60 |
| Winding Up | 60 |
| Commercial Disputes | 50 |
| Directors' Liabilities | 40 |
16. Subjects
- Company Law
- Directors' Duties
- Insolvency Law