Living the Link v Tan Lay Tin: Unfair Preferences & Director's Duties in Insolvency

In Living the Link Pte Ltd (in creditors’ voluntary liquidation) and others v Tan Lay Tin Tina and others, the High Court of Singapore heard a case brought by the liquidators of Living the Link Pte Ltd against Tina Tan Lay Tin, Alldressedup International Pte Ltd, and Link Boutique Pte Ltd, alleging unfair preferences and breach of director's duties. The court, presided over by Steven Chong J, found that certain transactions constituted undue preferences and that Tina Tan had breached her fiduciary duties as a director. The court ordered the reversal of specific transactions and imposed liability on Tina Tan for the value of the undue preferences and reimbursement of personal expenses.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Judgment for Plaintiffs

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Living the Link's liquidators sued Tina Tan & associate companies for unfair preferences and breach of director's duties. The court found undue preferences and director breach.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Leow Quek ShiongPlaintiffIndividualPartial JudgmentPartial
Living the Link Pte Ltd (in creditors’ voluntary liquidation)PlaintiffCorporationPartial JudgmentPartial
Chia Soo HienPlaintiffIndividualPartial JudgmentPartial
Tan Lay Tin TinaDefendantIndividualPartial JudgmentPartial
Alldressedup International Pte LtdDefendantCorporationPartial JudgmentPartial
Link Boutique Pte LtdDefendantCorporationPartial JudgmentPartial

3. Judges

Judge NameTitleDelivered Judgment
Steven ChongJudgeYes

4. Counsels

Counsel NameOrganization
Tan Tse Hsien BryanAdvocatus Law LLP
Suresh Sukumaran NairAdvocatus Law LLP
Tan Kheng Ann AlvinWong Thomas & Leong
Lo Ying Xi JohnWong Thomas & Leong

4. Facts

  1. Living was placed in creditors’ voluntary liquidation on 13 May 2010.
  2. Living transferred inventory and shares to associate companies before liquidation.
  3. Substantial inter-company cash transfers occurred between Living and Link.
  4. Cheong's Company Pte Ltd is a creditor of Living for rental arrears.
  5. Tina Tan was a director and sole shareholder of Living and associate companies.
  6. Liquidators claimed transfers of inventory, shares, and cash payments were wrongful.
  7. Living was dependent on financial support from Link and Alldressedup.

5. Formal Citations

  1. Living the Link Pte Ltd (in creditors’ voluntary liquidation) and others v Tan Lay Tin Tina and others, Suit No 544 of 2012, [2016] SGHC 67

6. Timeline

DateEvent
Living the Link Pte Ltd incorporated
Living enters into tenancy agreement with Cheong
Tenancy agreement extended till 31 March 2011
Demands for outstanding rental made
Living obtained $2m credit facility from Bank of East Asia
Living closed business and terminated lease
Living placed in creditors’ voluntary liquidation
Tina Tan examined by liquidators under s 285 of the Companies Act
Trial began
Judgment reserved
Trial concluded

7. Legal Issues

  1. Undue Preference
    • Outcome: The court found that certain transactions constituted undue preferences.
    • Category: Substantive
    • Sub-Issues:
      • Insolvency at the time of transaction
      • Desire to prefer creditor
      • Running account principle
  2. Breach of Director's Duties
    • Outcome: The court found that Tina Tan breached her fiduciary duties as a director.
    • Category: Substantive
    • Sub-Issues:
      • Fiduciary duty to creditors
      • Misapplication of company assets

8. Remedies Sought

  1. Reversal of impugned transactions
  2. Damages for breach of director's duties

9. Cause of Actions

  • Avoidance of Transactions
  • Breach of Fiduciary Duty
  • Undue Preference

10. Practice Areas

  • Commercial Litigation
  • Insolvency Litigation
  • Corporate Governance

11. Industries

  • Fashion
  • Retail

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Show Theatres Pte Ltd (in liquidation) v Shaw Theatres Pte Ltd and anotherSingapore High CourtYes[2002] 2 SLR(R) 1143SingaporeCited to establish that Link and Alldressedup were associates of Living for the purposes of ss 99 and 100 of the Bankruptcy Act.
Velstra Pte Ltd (in compulsory winding up) v Azero Investments SASingapore High CourtYes[2004] SGHC 251SingaporeCited for the principle that the cash flow and balance sheet tests for insolvency are to be read disjunctively.
Leun Wah Electric Co (Pte) Ltd (in liquidation) v Sigma Cable Co (Pte) LtdSingapore High CourtYes[2006] 3 SLR(R) 227SingaporeCited for the definition of the cash flow test for insolvency and the application of the balance sheet test.
Tam Chee Chong and another v DBS Bank LtdSingapore High CourtYes[2011] 2 SLR 310SingaporeCited for the evidence required to prove a company's state of illiquidity and the application of the cash flow test.
Tong Tien See Construction Pte Ltd (in liquidation) v Tong Tien See and othersSingapore High CourtYes[2001] 3 SLR (R) 887SingaporeCited for the principle that a temporary lack of liquidity does not amount to insolvency.
Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and othersSingapore High CourtYes[2004] 1 SLR(R) 434SingaporeCited regarding the factors the court considers when determining whether to wind up a company, including the prospect of financial support from shareholders.
Coöperatieve Centrale Raiffeisen-Boerenleenbank BA (trading as Rabobank International, Singapore Branch) v Jurong Technologies Industrial Corp Ltd (under judicial management)Singapore Court of AppealYes[2011] 4 SLR 977SingaporeCited for the principles governing undue preference claims, including the test for determining the debtor's desire to prefer a creditor.
Re MC Bacon LtdEngland and Wales High CourtYes[1990] BCLC 324England and WalesCited for the principles governing undue preference claims, specifically the test for determining the debtor's desire to prefer a creditor.
Liquidators of Progen Engineering Pte Ltd v Progen Holdings LtdSingapore Court of AppealYes[2010] 4 SLR 1089SingaporeCited as the leading authority in Singapore on undue preferences given to associates and the principles for rebutting the statutory presumption.
Wilson and another v Masters International Ltd and anotherEngland and Wales High CourtYes[2009] EWHC 1753 (Ch)England and WalesCited for the principle that the defendants have to satisfy the court that the company was acting solely with reference to proper commercial considerations and not influenced by a desire to prefer the creditor.
Richardson v Commercial Banking Co of Sydney LtdHigh Court of AustraliaYes(1952) 85 CLR 110AustraliaCited as one of the authorities for the running account principle.
Airservices Australia v Ferrier and anotherHigh Court of AustraliaYes(1996) 185 CLR 483AustraliaCited for the definition of a running account and its relevance to preference law.
Re Libra Industries Pte Ltd (in compulsory liquidation)Singapore High CourtYes[1999] 3 SLR(R) 205SingaporeCited for the application of the running account principle in the context of undue preferences given to related creditors.
Wills and another v Corfe Joinery Ltd (in liquidation)England and Wales High CourtYes[1998] 2 BCLC 75England and WalesDistinguished on the basis that there was a valid commercial basis for the transfers in Re Libra.
In Re Paramount Airways Ltd (in Administration)England and Wales Court of AppealYes[1993] 1 Ch 223England and WalesCited for the principle that the court has a wide discretion in making orders under s 99(2) of the Bankruptcy Act.
Ramlort Ltd v Michael James Meston ReidEngland and Wales Court of AppealYes[2004] EWCA Civ 800England and WalesCited for the principle that the court should fashion the most appropriate remedy with a view to restoring the position as it would have been if the debtor had not entered into the transaction.
Pena v Coyne and another (No 2)England and Wales High CourtYes[2004] 2 BCLC 730England and WalesCited for the principle that the court may allow the defendant to retain the asset in return for a payment of the difference between the full value of the asset and the value which was in fact received by the company.
Federal Express Pacific Inc v Meglis Airfreight Pte Ltd (formerly known as Thong Soon Airfreight Pte Ltd)Singapore High CourtYes[1998] SGHC 417SingaporeCited for the principle that directors owe a duty to consider creditors’ interests only during insolvency or near insolvency.
Multinational Gas and Petrochemical Co v Multinational Gas and Petrochemical Services LtdEngland and Wales High CourtYes[1983] Ch 258England and WalesCited for the principle that directors owe a duty to consider creditors’ interests only during insolvency or near insolvency.
Lexi Holdings plc (In Administration) v LuqmanEngland and Wales High CourtYes[2007] EWHC 2652 (Ch)England and WalesCited for the principle that directors owe a duty to consider creditors’ interests only during insolvency or near insolvency.
Liquidator of West Mercia Safetywear Ltd v Dodd and anotherEngland and Wales Court of AppealYes(1988) BCC 30England and WalesCited as the authority most often cited for the proposition that a director may be made personally liable for procuring an undue preference.
Kevin Hellard, Devdutt Patel (in their capacity as the Joint Liquidators of HLC Environment Projects Ltd) v Horacio Luis De Brito CarvalhoEngland and Wales High CourtYes[2013] EWHC 2876 (Ch)England and WalesCited for the application of West Mercia and the principle that proof of loss to the company is not strictly required in a claim against a director for procuring an undue preference.
Knight v Frost and othersEngland and Wales High CourtYes[1999] 1 BCLC 364England and WalesCited for the principle that courts must be slow in allowing the liquidator to circumvent the strict statutory criteria for an undue preference.
Re Continental Assurance Co of London plc (in liquidation) (No 4); Singer and another v Beckett and othersEngland and Wales High CourtYes[2007] 2 BCLC 287England and WalesCited for the principle that courts must be slow in allowing the liquidator to circumvent the strict statutory criteria for an undue preference.
Re Sanpete Builders (S) Pte LtdSingapore High CourtYes[1989] 1 SLR(R) 5SingaporeCited regarding the factors the court considers when determining whether to wind up a company.
BNY Corporate Trustee Services Limited and others v Neuberger Berman Europe Ltd (on behalf of Sealink Funding Ltd) and othersUnited Kingdom Supreme CourtYes[2013] UKSC 28United KingdomCited for the principle that prospective liabilities must be placed into the equation when applying the balance sheet test.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 329Singapore
Bankruptcy Act (Cap 20, 2009 Rev Ed) s 99Singapore
Bankruptcy Act (Cap 20, 2009 Rev Ed) s 100Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Creditors’ voluntary liquidation
  • Undue preference
  • Director's duties
  • Insolvency
  • Running account principle
  • Associate companies
  • Liquidators
  • Misfeasance
  • Fiduciary duty

15.2 Keywords

  • Insolvency
  • Unfair preference
  • Director's duties
  • Liquidation
  • Companies Act
  • Bankruptcy Act
  • Fiduciary duty
  • Running account
  • Singapore
  • High Court

17. Areas of Law

Area NameRelevance Score
Insolvency Law95
Unfair preferences90
Avoidance of transfer90
Liquidation80
Director's Duties75
Company Law70

16. Subjects

  • Insolvency
  • Corporate Law
  • Fiduciary Duty
  • Unfair Preference