Encus International Pte Ltd v Tenacious Investment Pte Ltd: Avoidance of Transactions, Unfair Preference, Anti-Deprivation Principle
In the High Court of Singapore, Encus International Pte Ltd (in compulsory liquidation) sought to recover shares transferred to Tenacious Investment Pte Ltd, arguing it was an unfair preference, a transaction at an undervalue, or breached the anti-deprivation principle. The court, presided over by Justice Judith Prakash, ruled in favor of Encus International, declaring the share transfer void as both an unfair preference and a transaction at an undervalue. The court ordered the return of the shares.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Judgment for Plaintiff
1.3 Case Type
Insolvency
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
The High Court declared the share transfer from Encus International to Tenacious Investment void as an unfair preference and transaction at an undervalue.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| ENCUS INTERNATIONAL PTE LTD (in compulsory liquidation) | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| TENACIOUS INVESTMENT PTE LTD | Defendant | Corporation | Claim Dismissed | Lost | |
| KOH BOON HWEE | Defendant | Individual | Claim Dismissed | Lost | |
| LIM KIM BOCK | Defendant | Individual | Claim Dismissed | Lost | |
| SIM BENG CHYE | Defendant | Individual | Claim Dismissed | Lost | |
| PI HOLDINGS LTD | Defendant | Corporation | Claim Dismissed | Lost | |
| GCL HOLDINGS (BVI) LTD | Defendant | Corporation | Claim Dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Judith Prakash | Judge | Yes |
4. Counsels
4. Facts
- Encus International Pte Ltd (in liquidation) sought to recover shares in DKE Precision Pte Ltd.
- In May 2013, Encus transferred shares to Tenacious Investment Pte Ltd per a Conditional Share Transfer Agreement (CSTA).
- The CSTA was dated 26 January 2012 and made between Encus and the Investors.
- Encus was placed under judicial management on 5 June 2013 and in liquidation on 14 November 2013.
- The Investors had invested $8.8m in Encus, with the DKE shares serving as security.
- The CSTA broadened the rights of the Investors beyond the original terms of the investment.
- The Investors invoked their right to the Share Transfer based on Encus's insolvency.
5. Formal Citations
- Encus International Pte Ltd(in compulsory liquidation)vTenacious Investment Pte Ltd and others, Originating Summons No 1118 of 2014, [2016] SGHC 50
6. Timeline
| Date | Event |
|---|---|
| Mr. Tan approached the third and fourth defendants seeking an injection of funds. | |
| Parties agreed to terms stated in an Investment Term Sheet. | |
| Investors and the Company entered into a convertible loan agreement. | |
| Investors lent the Company further sums totalling $6.1m. | |
| Investors lent the Company further sums totalling $6.1m. | |
| Investors lent the Company $483,319.02. | |
| The Conditional Share Transfer Agreement was executed. | |
| Investors invoked their right to have the Share Transfer performed. | |
| The Share Transfer was effected. | |
| The Company was placed under judicial management. | |
| A winding-up application was filed. | |
| The Company was placed in liquidation. | |
| Originating Summons No 1118 of 2014 filed. | |
| Hearing date. | |
| Hearing date. | |
| Hearing date. | |
| Judgment reserved. |
7. Legal Issues
- Transaction at an Undervalue
- Outcome: The court declared the Conditional Share Transfer Agreement void as a transaction at an undervalue.
- Category: Substantive
- Related Cases:
- [1990] BCC 78
- [2007] WLR 2404
- Unfair Preference
- Outcome: The court declared the transfer of shares an unfair preference.
- Category: Substantive
- Related Cases:
- [1993] BCLC 635
- Breach of Anti-Deprivation Rule
- Outcome: The court did not rule on this issue as the application was decided on other grounds.
- Category: Substantive
- Related Cases:
- [2012] 1 AC 383
- Superseding of Term Sheet by Convertible Loan Agreement
- Outcome: The court held that the Term Sheet was superseded by the Convertible Loan Agreement.
- Category: Substantive
- Related Cases:
- [2007] 3 SLR(R) 537
- [2012] SGHC 70
8. Remedies Sought
- Declaration that the transfer of shares be annulled
- Order for the return of the shares
9. Cause of Actions
- Avoidance of transactions
- Unfair preference
- Breach of anti-deprivation principle
10. Practice Areas
- Commercial Litigation
- Insolvency Law
- Contract Law
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Lee Chee Wei v Tan Hor Peow Victor and another appeal | Court of Appeal | Yes | [2007] 3 SLR(R) 537 | Singapore | Cited for the effect of entire agreement clauses on prior agreements. |
| Cherie Hearts Group International Pte Ltd v G8 Education Ltd | High Court | Yes | [2012] SGHC 70 | Singapore | Cited for the effect of an entire agreement clause. |
| Re MC Bacon Ltd | English High Court | Yes | [1990] BCC 78 | England | Cited for the principle that the creation of a security over a company’s assets does not deplete them and does not come within the paragraph relating to undervalued transactions. |
| Hill v Spread Trustee Co Ltd and another | English Court of Appeal | Yes | [2007] WLR 2404 | England | Cited for the principle that a transaction involving the grant of security can amount to a transaction for no consideration. |
| Feakins v Department for Environment Food and Rural Affairs | English Court of Appeal | Yes | [2007] BCC 54 | England | Cited for applying the principles in Re MC Bacon Ltd. |
| Pacrim Investments Pte Ltd v Tan Mui Keow Claire | Court of Appeal | Yes | [2008] 2 SLR(R) 898 | Singapore | Cited for the principle that an equitable mortgage can be created by the deposit of shares together with a blank transfer form. |
| Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another appeal | Court of Appeal | Yes | [2013] 4 SLR 193 | Singapore | Cited for the principles on implying a term in fact into a contract. |
| Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo | High Court | Yes | [2004] 1 SLR(R) 434 | Singapore | Cited for the principle that solvency is determined according to the balance sheet test or the cash flow test. |
| Re Great Eastern Hotel (Pte) Ltd | High Court | Yes | [1988] 2 SLR(R) 276 | Singapore | Cited for the cash flow test for insolvency. |
| Re Ledingham-Smith | English High Court | Yes | [1993] BCLC 635 | England | Cited for the principle that the focus of an unfair preference claim is on the actual transfer of value. |
| Belmont Park Investments Pty Ltd and others v BNY Corporate Trustee Services Ltd and another | English case | Yes | [2012] 1 AC 383 | England | Cited for the anti-deprivation rule. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50) | Singapore |
| Bankruptcy Act (Cap 20) | Singapore |
| Section 329(1) of the Companies Act (Cap 50) | Singapore |
| Sections 98 and 99 of the Bankruptcy Act (Cap 20) | Singapore |
| Section 76 of the Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Section 101(6) of the Bankruptcy Act | Singapore |
| Section 101(9)(b) of the Bankruptcy Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Conditional Share Transfer Agreement
- Convertible Loan Agreement
- Investment Term Sheet
- DKE Shares
- Unfair preference
- Transaction at an undervalue
- Anti-deprivation rule
- Liquidation
- Insolvency
15.2 Keywords
- liquidation
- unfair preference
- transaction at undervalue
- anti-deprivation
- share transfer
- insolvency
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Insolvency Law | 95 |
| Contract Law | 60 |
| Company Law | 50 |
| Credit and Security | 40 |
| Chancery and Equity | 30 |
16. Subjects
- Insolvency
- Contract Law
- Corporate Law