Rothstar Group Ltd v Chee Yoh Chuang: Avoidance of Mortgage as Undervalued Transaction
In three consolidated originating summonses before the General Division of the High Court of Singapore, Rothstar Group Ltd sought to remove a caveat lodged by the private trustees in bankruptcy of Ng Say Peck. The private trustees of Ng and the liquidator of Pictorial Development Pte Ltd applied to void a mortgage granted by Ng and Pictorial to Rothstar, arguing it was an undervalued transaction or a voluntary conveyance to defraud creditors. Chua Lee Ming J dismissed Rothstar's application and granted the applications to void the mortgage, finding it was an undervalued transaction. Rothstar was ordered to pay costs.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Applications in Originating Summons Nos 87 and 89 granted; Originating Summons No 78 dismissed.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
The High Court declared a mortgage void as an undervalued transaction, benefiting AIPL's debt, not the mortgagors, Pictorial and Ng. Rothstar's application to remove a caveat was dismissed.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Lin Yueh Hung | Plaintiff, Respondent | Individual | Application granted | Won | |
| Leow Quek Shiong | Plaintiff, Respondent | Individual | Application granted | Won | |
| Chee Yoh Chuang | Plaintiff, Respondent | Individual | Application granted | Won | |
| Rothstar Group Ltd | Defendant, Applicant | Corporation | Application dismissed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chua Lee Ming | Judge of the High Court | Yes |
4. Counsels
4. Facts
- Pictorial owned 99% of the Property; Ng owned the remaining 1%.
- Rothstar gave a $5m loan to AIPL, secured by an equitable mortgage over the Property.
- AIPL failed to repay the loan by the extended deadline.
- Rothstar requested a legal mortgage over the Property.
- Ng and Pictorial executed the Mortgage as security for AIPL's debt.
- AIPL subsequently faced financial difficulties and was wound up.
- Ng was adjudged bankrupt.
5. Formal Citations
- Rothstar Group Ltd v Chee Yoh Chuang and another and other matters, , [2021] SGHC 176
6. Timeline
| Date | Event |
|---|---|
| Loan Agreement signed between Rothstar and AIPL | |
| Agreement for Equitable Mortgage signed | |
| Second Addendum to Loan Agreement signed | |
| Deed of Discharge and Termination entered into | |
| Ng and Pictorial executed the Mortgage | |
| Mortgage registered | |
| AIPL applied for a moratorium under s 211B of the Companies Act | |
| Commerzbank filed bankruptcy applications against Ng and his wife | |
| Bankruptcy order made against Ng | |
| Private Trustees lodged a caveat against the Property | |
| Private Trustees filed an application to compulsorily wind up Pictorial | |
| Pictorial was ordered to be wound up | |
| Judicial managers filed a winding up application | |
| AIPL was wound up | |
| Hearing date | |
| Judgment date |
7. Legal Issues
- Whether the Mortgage was an undervalued transaction under s 98 of the Bankruptcy Act
- Outcome: The court held that the Mortgage was an undervalued transaction that was void under s 98 of the Bankruptcy Act.
- Category: Substantive
- Sub-Issues:
- Consideration for the mortgage
- Insolvency of Pictorial and Ng
- Benefit to Pictorial and Ng
- Whether the Mortgage was a voluntary conveyance made to defraud creditors under s 73B of the Conveyancing and Law of Property Act
- Outcome: The court held that the Liquidator and the Private Trustees failed to establish actual intent to defraud and were thus not entitled to void the Mortgage under s 73B of the CLPA.
- Category: Substantive
- Sub-Issues:
- Intent to defraud creditors
- Prejudice to creditors
8. Remedies Sought
- Declaration that the Mortgage is void
- Removal of caveat
9. Cause of Actions
- Avoidance of transaction at an undervalue
- Voluntary conveyance to defraud creditors
10. Practice Areas
- Insolvency Litigation
- Real Estate Law
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Mercator & Noordstar NV v Velstra Pte Ltd (in liquidation) | High Court | Yes | [2003] 4 SLR(R) 667 | Singapore | Cited for the elements that the Liquidator and the Private Trustees had to prove to void the Mortgage. |
| Re MC Bacon Ltd | N/A | Yes | [1990] BCLC 324 | United Kingdom | Cited for the principle that the mere creation of a security over a company’s assets does not deplete them and does not come within s 234(4)(b) of the 1986 Act. |
| Hill v Spread Trustee Co Ltd and another | English Court of Appeal | Yes | [2007] 1 WLR 2404 | United Kingdom | 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 | United Kingdom | Cited with approval the decision in MC Bacon that the granting of charges did not deplete the grantor’s assets. |
| Encus International Pte Ltd (in compulsory liquidation) v Tenacious Investment Pte Ltd and others | High Court | Yes | [2016] 2 SLR 1178 | Singapore | The Court noted that the question of law as to whether a grant of security can qualify in principle as an undervalued transaction, was not settled. |
| Quah Kay Tee v Ong and Co Pte Ltd | Court of Appeal | Yes | [1996] 3 SLR(R) 637 | Singapore | Cited for the principles regarding intent to defraud creditors under s 73B(1) of the CLPA. |
| Wong Ser Wan v Ng Bok Eng Holdings Pte Ltd and another | High Court | Yes | [2004] 4 SLR(R) 365 | Singapore | Cited for the principles regarding intent to defraud creditors under s 73B(1) of the CLPA. |
| Larsen Oil and Gas Pte Ltd v Petroprod Ltd (in official liquidation in the Cayman Islands and in compulsory liquidation in Singapore) | High Court | Yes | [2011] 3 SLR 414 | Singapore | Cited for the principles regarding intent to defraud creditors under s 73B(1) of the CLPA. |
| Williams and others v Lloyd and another | N/A | Yes | (1934) 50 CLR 341 | Australia | Cited for the principle that the Liquidator and the Private Trustees were the representatives of Pictorial’s creditors and Ng’s creditors respectively and fell within the scope of “persons prejudiced” by the grant of the Mortgage and have standing under s 73B of the CLPA. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Bankruptcy Act (Cap 20, 2009 Rev Ed) | Singapore |
| Bankruptcy Act | Singapore |
| Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) | Singapore |
| Land Titles Act (Cap 157, 2004 Rev Ed) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Mortgage
- Transaction at an undervalue
- Voluntary conveyance
- Insolvency
- Equitable mortgage
- Legal mortgage
- Deed of Discharge
- Loan Agreement
- Caveat
15.2 Keywords
- Mortgage
- Undervalued transaction
- Insolvency
- Bankruptcy
- Property
- Conveyance
- Creditors
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Insolvency Law | 95 |
| Avoidance of transfer | 90 |
| Transactions at an undervalue | 90 |
| Caveats | 40 |
| Property Law | 40 |
| Bankruptcy | 30 |
| Corporate Law | 20 |
| Contract Law | 10 |
16. Subjects
- Insolvency
- Property Law
- Mortgages
- Commercial Law