RCMA Asia v Sun Electric Power: Winding Up Order for Insolvency & Breach of Injunction

In the High Court of Singapore, RCMA Asia Pte Ltd applied to wind up Sun Electric Power Pte Ltd (SEPPL). The court, presided over by Justice Tan Siong Thye, granted the application on 7 September 2020, ordering SEPPL to be wound up. RCMA argued that SEPPL was unable to pay its debts and that it was just and equitable to wind up the company due to suspicious financial activities, including breaches of an injunction. SEPPL had a claim and counterclaim in Suit 191, but the court found that SEPPL was insolvent and had engaged in conduct that unfairly prejudiced RCMA's interests.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Application granted and ordered that Sun Electric Power Pte Ltd be wound up.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court orders Sun Electric Power Pte Ltd to be wound up due to insolvency and breach of injunction, favoring RCMA Asia's application.

1.7 Decision Date

29 September 2020

2. Parties and Outcomes

Party Name	Role	Type	Outcome	Outcome Type	Counsels
RCMA Asia Pte Ltd	Plaintiff	Corporation	Application granted	Won	Mohammed Reza s/o Mohammed Riaz, Kwek Yuan Justin, Victoria Katerina Jones
Sun Electric Power Pte Ltd	Defendant	Corporation	Winding up ordered	Lost	Lim Chee San
Energy Market Authority of Singapore	Non-party	Government Agency	Neutral	Neutral

3. Judges

Judge Name	Title	Delivered Judgment
Tan Siong Thye	Judge	Yes

4. Counsels

Counsel Name	Organization
Mohammed Reza s/o Mohammed Riaz	JWS Asia Law Corporation
Kwek Yuan Justin	JWS Asia Law Corporation
Victoria Katerina Jones	JWS Asia Law Corporation
Lim Chee San	TanLim Partnership

4. Facts

RCMA commenced Suit 191 against SEPPL, claiming $7,466,668.01.
RCMA obtained an interim injunction restraining SEPPL from diminishing RCMA’s 70% share of incentive payments.
Mr. Peloso withdrew $1.5m from SEPPL’s OCBC Account, which was used to extend a loan to SEEAPL.
Kashish commenced a suit against SEPPL for $6,995,755.78 and obtained judgment in default of appearance.
Kashish garnished the DBS Account, and DBS Bank Ltd debited the account in full pursuant to the court order.
SEPPL applied for judicial management, which was dismissed.
RCMA served a statutory demand on SEPPL for $11,568.88, which SEPPL failed to satisfy fully.

5. Formal Citations

RCMA Asia Pte Ltd v Sun Electric Power Pte Ltd, Companies Winding Up No 393 of 2019, [2020] SGHC 205

6. Timeline

Date	Event
2018-02-22	RCMA commenced Suit 191 claiming $7,466,668.01 from SEPPL.
2018-02-22	RCMA applied for an ex parte interim injunction against SEPPL.
2018-02-26	Court ordered RCMA's injunction application to be heard on an inter partes basis.
2018-05-11	Court granted RCMA an interim injunction restraining SEPPL from diminishing RCMA’s 70% share of incentive payments.
2018-07-01	RCMA completed performance of obligations, following which Funds were received by SEPPL.
2018-09-24	Mr. Peloso withdrew $1.5m from SEPPL’s OCBC Account.
2018-11-27	Mr Peloso transferred $6,091,555.39 from the OCBC Account to SEPPL’s DBS Bank Ltd account.
2018-12-03	Mr Peloso transferred $6,091,555.39 from the OCBC Account to SEPPL’s DBS Bank Ltd account.
2018-12-17	Mr Peloso transferred $6,091,555.39 from the OCBC Account to SEPPL’s DBS Bank Ltd account.
2019-01-08	Kashish commenced a suit against SEPPL for $6,995,755.78.
2019-02-04	Kashish obtained judgment in default of appearance against SEPPL.
2019-02-13	Kashish applied to garnish the DBS Account.
2019-02-18	Kashish obtained a garnishee order for DBS Bank Ltd to show cause.
2019-02-21	A copy of the court order was served on SEPPL.
2019-03-08	Court granted Kashish’s garnishee application.
2019-03-21	DBS Bank Ltd debited the DBS Account in full pursuant to the court order.
2019-08-21	SEPPL applied for judicial management.
2019-09-16	Mareva injunction granted restraining SEPPL and its related entities from removing assets from Singapore.
2019-09-17	SEPPL applied for interim judicial management.
2019-09-23	IJM application was dismissed.
2019-10-24	JM application was dismissed.
2019-10-30	RCMA’s solicitors requested SEPPL to make payment of the Costs.
2019-11-21	RCMA’s solicitors sent a letter served by hand and by registered mail to SEPPL’s registered office, requiring SEPPL to make payment of $11,568.88.
2019-12-11	SEPPL’s solicitors responded to the Statutory Demand by letter.
2019-12-13	RCMA received $3,000 from SEPPL.
2019-12-18	RCMA applied for SEPPL to be wound up.
2020-04-20	The prescribed period under COVID-19 (Temporary Measures) (Prescribed Period) Order 2020 commenced.
2020-08-14	Hearing before the court where SEPPL stated it would pay outstanding costs within three days.
2020-09-07	Court granted RCMA’s application and ordered that SEPPL be wound up.
2020-09-09	SEPPL filed a Notice of Appeal against the decision.
2020-09-30	Reasons for decision issued.

7. Legal Issues

Insolvency
- Outcome: The court found that SEPPL was deemed to be insolvent under s 254(2)(a) of the Companies Act due to its failure to satisfy the Statutory Demand. The court also concluded that SEPPL was both cash flow insolvent and balance sheet insolvent.
- Category: Substantive
- Sub-Issues:
  - Cash flow insolvency
  - Balance sheet insolvency
  - Failure to satisfy statutory demand
- Related Cases:
  - [1991] 2 SLR(R) 567
  - [1962] 1 WLR 555
  - [2004] 1 SLR(R) 434
  - [2011] SGHC 228
  - [2019] SGHC 228
Just and Equitable Winding-Up
- Outcome: The court found that the circumstances were such that it was just and equitable for SEPPL to be wound up due to the lack of probity in the conduct and management of the company’s affairs and the unfair prejudice to RCMA’s interests.
- Category: Substantive
- Sub-Issues:
  - Loss of confidence in directors
  - Lack of probity in conduct and management of company affairs
  - Unfair prejudice to creditor's interests
- Related Cases:
  - [2006] 3 SLR(R) 827
  - [2006] SGHC 190
  - [1993] 2 SLR(R) 685
  - [1924] AC 783
  - [2008] 4 SLR(R) 362
  - (1916) 32 TLR 253
Disputed Debt
- Outcome: The court did not consider that there was a substantial and bona fide dispute in respect of RCMA’s debt of $7,466,668.01. Even if there was, there were exceptional circumstances justifying the winding-up of SEPPL.
- Category: Procedural
- Sub-Issues:
  - Substantial and bona fide dispute
  - Abuse of process
- Related Cases:
  - [2008] 2 SLR(R) 491
  - [2000] 1 SLR(R) 135
  - [1997] 1 BCLC 572
  - [1997] 1 WLR 534
  - [2010] 2 BCLC 624
  - [2009] 2 SLR(R) 949

8. Remedies Sought

Winding-up order
Appointment of liquidator

9. Cause of Actions

Breach of Contract
Failure to pay debt

10. Practice Areas

Winding Up
Commercial Litigation

11. Industries

Energy

12. Cited Cases

Case Name	Court	Affirmed	Citation	Jurisdiction	Significance
Re People’s Parkway Development Pte Ltd	High Court	Yes	[1991] 2 SLR(R) 567	Singapore	Cited for the definition of a 'contingent creditor' in the context of winding-up applications.
Re William Hockley Ltd	Not Available	Yes	[1962] 1 WLR 555	England and Wales	Cited for the definition of a 'contingent creditor' as a person towards whom the company may become subject to a present liability upon the happening of some future event.
Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and others	High Court	Yes	[2004] 1 SLR(R) 434	Singapore	Cited for the holistic and commercial inquiry into a company's position as a whole to determine its ability to meet liabilities.
Kon Yin Tong and another v Leow Boon Cher and others	High Court	Yes	[2011] SGHC 228	Singapore	Cited for the explanation of the cash flow test and the balance sheet test to determine a company's insolvency.
Seah Chee Wan and another v Connectus Group Pte Ltd	High Court	Yes	[2019] SGHC 228	Singapore	Cited for the explanation of the cash flow test and the balance sheet test to determine a company's insolvency.
Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another	High Court	No	[2020] SGHC 18	Singapore	Cited for Gill JC's findings regarding the impropriety of the dealings with the Funds and the real risk of dissipation of assets by SEPPL.
Sim Yong Kim v Evenstar Investments Pte Ltd	Court of Appeal	Yes	[2006] 3 SLR(R) 827	Singapore	Cited for the principle that unfairness lies at the heart of the 'just and equitable' jurisdiction in s 254(1)(i) of the Companies Act.
Summit Co (S) Pte Ltd v Pacific Biosciences Pte Ltd	High Court	Yes	[2006] SGHC 190	Singapore	Cited for the objective test for unfairness in a just and equitable winding-up, which is whether a reasonable bystander would regard the conduct as unfairly prejudicing the petitioner's interests.
Chong Choon Chai and another v Tan Gee Cheng and another	Not Available	Yes	[1993] 2 SLR(R) 685	Singapore	Cited for the principle that a just and equitable winding-up may be granted when there is a loss of confidence in the directors due to their lack of probity.
Loch v John Blackwood, Ltd	House of Lords	Yes	[1924] AC 783	United Kingdom	Cited for the principle that a just and equitable winding-up may be granted when there is a loss of confidence in the directors due to their lack of probity.
Chow Kok Chuen v Chow Kwok Chi and another	Court of Appeal	Yes	[2008] 4 SLR(R) 362	Singapore	Cited for the principle that the grounds for the court to exercise its 'just and equitable' jurisdiction are not a closed list.
In re Blériot Manufacturing Aircraft Company (Limited)	Not Available	Yes	(1916) 32 TLR 253	England and Wales	Cited for the principle that the words 'just and equitable' are words of the widest significance and do not limit the jurisdiction of the Court to any case.
Pacific Recreation Pte Ltd v S Y Technology Inc and another appeal	Court of Appeal	Yes	[2008] 2 SLR(R) 491	Singapore	Cited for the principle that a winding-up petition is not an appropriate means of enforcing a disputed debt, and it would be an abuse of the process of the court to allow a creditor to wind up a company on the basis of a disputed debt.
LKM Investment Holdings Pte Ltd v Cathay Theatres Pte Ltd	High Court	Yes	[2000] 1 SLR(R) 135	Singapore	Cited for the explanation of what amounts to a substantial and bona fide dispute in the context of a winding-up application.
Re Claybridge Shipping Co SA	Court of Appeal	Yes	[1997] 1 BCLC 572	England and Wales	Cited for the principle that the refusal of the court to entertain cases where the underlying debt is said to be disputed is a matter of practice only, not a rule of law.
Alipour v Ary and Another	Court of Appeal	Yes	[1997] 1 WLR 534	England and Wales	Cited for the principle that it is only a rule of practice and not one of law for the Companies Court to refuse to determine a dispute on the creditor petitioner’s locus standi.
Re GBI Investments Ltd; Lacontha Foundation v GBI Investments Pte Ltd	High Court	Yes	[2010] 2 BCLC 624	England and Wales	Cited for the principle that there is no absolute jurisdictional bar to a petition being allowed to proceed, or indeed the making of a winding-up order, where the debt on which the petition is founded is bona fide disputed on substantial grounds.
BNP Paribas v Jurong Shipyard Pte Ltd	Court of Appeal	Yes	[2009] 2 SLR(R) 949	Singapore	Cited for the principle that the court’s power to order a winding-up is a discretionary one.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute Name	Jurisdiction
Electricity Act (Cap 89A, 2002 Rev Ed)	Singapore
Companies Act (Cap 50, 2006 Rev Ed)	Singapore
COVID-19 (Temporary Measures) Act 2020 (Act 14 of 2020)	Singapore

15. Key Terms and Keywords

15.1 Key Terms

Winding-up
Insolvency
Statutory Demand
Injunction
Garnishee Order
Judicial Management
Contingent Creditor
Cash Flow Insolvency
Balance Sheet Insolvency
Just and Equitable

15.2 Keywords

Winding up
Insolvency
Companies Act
Singapore
RCMA Asia
Sun Electric Power
Injunction
Statutory Demand

16. Subjects

Insolvency
Winding Up
Companies Law

17. Areas of Law

Insolvency Law
Companies Law
Civil Procedure