Marina Towage Pte Ltd v Chin Kwek Chong: Fraudulent Trading & Directors' Liability

In Marina Towage Pte Ltd v Chin Kwek Chong, the General Division of the High Court of Singapore dismissed the plaintiff's claim against the defendants, who were directors of Island Logistic Pte Ltd (IL). The plaintiff sought a declaration under s 340(1) of the Companies Act, alleging that the defendants were personally liable for IL's judgment debt due to fraudulent trading. Justice Vinodh Coomaraswamy found that the plaintiff failed to prove that IL was trading fraudulently at the material time. The court also addressed procedural objections raised by the second defendant and assessed the weight of evidence presented, ultimately ruling in favor of the defendants.

1. Case Overview

1.1 Court

General Division of the High Court of the Republic of Singapore

1.2 Outcome

I dismiss the plaintiff’s claim.

1.3 Case Type

Civil

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore court dismisses claim against directors for fraudulent trading. The key legal issue was whether the company traded to defraud creditors.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Marina Towage Pte LtdPlaintiffCorporationClaim DismissedLost
Chin Kwek ChongDefendantIndividualJudgment for DefendantWon
Chin Chee ChienDefendantIndividualJudgment for DefendantWon

3. Judges

Judge NameTitleDelivered Judgment
Vinodh CoomaraswamyJudge of the High CourtYes

4. Counsels

Counsel NameOrganization
Navinder SinghKSCGP Juris LLP
Farah Nazura Binte ZainudinKSCGP Juris LLP
Lim Muhammad SyafiqChangAroth Chambers LLC
Anil ChangarothChangAroth Chambers LLC
Tian KeyunYuen Law LLC
Lim Ying YingYuen Law LLC
Amos CaiYuen Law LLC

4. Facts

  1. Plaintiff secured a judgment debt against Island Logistic Pte Ltd (IL) in February 2018.
  2. Plaintiff commenced action under s 340(1) of the Companies Act to hold defendants personally responsible for IL’s debt.
  3. Plaintiff alleged IL was trading fraudulently and defendants were knowingly a party to it.
  4. IL chartered two vessels from the plaintiff and sub-chartered them to Blue Metal Investments Pte Ltd (BMI).
  5. Disputes arose between BMI and IL, leading to BMI stopping payments to IL.
  6. IL, in turn, stopped payments to the plaintiff.
  7. IL was dormant since 2013 and its only revenue source was the sub-charterparties with BMI.

5. Formal Citations

  1. Marina Towage Pte Ltd v Chin Kwek Chong and another, Suit No 158 of 2019, [2021] SGHC 81

6. Timeline

DateEvent
Plaintiff chartered two vessels to IL
Vessels delivered to IL
BMI stopped paying hire to IL
BMI sued the plaintiff in the Maldives
Plaintiff commenced arbitration against IL
Plaintiff secured two awards against IL
Plaintiff commenced enforcement proceedings
Plaintiff secured leave to enforce awards against IL
Plaintiff secured order to examine the second defendant
Plaintiff secured order to examine the first defendant
Plaintiff commenced action against defendants
Trial of action took place
Judgment reserved

7. Legal Issues

  1. Fraudulent Trading
    • Outcome: The court found that the plaintiff failed to prove that the company was trading fraudulently.
    • Category: Substantive
    • Sub-Issues:
      • Intent to defraud creditors
      • Knowing participation in fraudulent trading
  2. Directors' Liability
    • Outcome: The court found that the plaintiff failed to prove that the directors were knowingly a party to the company's fraudulent trading.
    • Category: Substantive
    • Sub-Issues:
      • Liability for fraudulent trading
      • Knowing participation in fraudulent trading
  3. No case to answer
    • Outcome: The court considered whether the plaintiff’s case against the second defendant was so weak that it ought to be dismissed even though he elected to call no evidence at trial to establish his pleaded defence.
    • Category: Procedural

8. Remedies Sought

  1. Declaration that each defendant is personally liable for IL’s judgment debt

9. Cause of Actions

  • Application under Section 340(1) of the Companies Act

10. Practice Areas

  • Commercial Litigation
  • Insolvency Law

11. Industries

  • Shipping

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Aquariva Pte Ltd v Gezel Group Pte Ltd and anotherHigh CourtYes[2017] SGHCR 14SingaporeCited to support the interpretation of s 340(1) of the Companies Act, clarifying that winding up is not a condition precedent to an application under the section.
ABU v Comptroller of Income TaxCourt of AppealYes[2015] 2 SLR 420SingaporeCited for the principle against the retrospective application of legislation.
L’Office Chefifien Des Phosphates v Yamashita-Shinnihon Steamship Co LtdPrivy CouncilYes[1994] 1 AC 486United KingdomCited for the principle against the retrospective application of legislation.
Max-Sun Trading Ltd and another v Tang Mun Kit and another (Tan Siew Moi, third party)Court of AppealYes[2016] 5 SLR 815SingaporeCited and distinguished regarding the procedural requirements for invoking s 340(1) of the Act, specifically whether the action must be against the company itself.
Kiyue Co Ltd v Aquagen International Pte LtdHigh CourtYes[2003] 3 SLR(R) 130SingaporeCited regarding the drafting convention in the Act distinguishing between an 'action' and an 'arbitration'.
Tang Eng Iron Works Co Ltd v Ting Ling Kiew & AnorHigh CourtYes[1990] 2 MLJ 440MalaysiaCited as an example where fresh proceedings were commenced against directors seeking a declaration under the Malaysian equivalent of s 340(1).
Chin Chee Keong v Toling Corp (M) Sdn BhdHigh CourtYes[2016] 3 MLJ 479MalaysiaCited as authority for the proposition that an applicant under the Malaysian equivalent of s 340(1) of the Act would necessarily have to proceed by separate originating process.
Liquidator of Leong Seng Hin Piling Pte Ltd v Chan Ah Lek and othersHigh CourtYes[2007] 2 SLR(R) 77SingaporeCited as an example where liquidators of a company made an application under s 340(1) of the Companies Act while the company was in the course of being wound up, and the application was made by originating process.
M+W Singapore Pte Ltd v Leow Tet Sin and anotherHigh CourtYes[2015] 2 SLR 271SingaporeCited as an example where liquidators of a company made an application under s 340(1) of the Companies Act while the company was in the course of being wound up, and the application was made by originating process.
Traxiar Drilling Partners II Pte Ltd (in liquidation) v Dvergsten, Dag OivindHigh CourtYes[2019] 4 SLR 433SingaporeCited as an example where liquidators of a company made an application under s 340(1) of the Companies Act while the company was in the course of being wound up, and the application was made by originating process.
Morris and others v Bank of America and othersHigh CourtYes[2002] All ER (D) 435 (Jul)EnglandCited as an example where originating process is used in England for applications under s 340(1) of the Companies Act.
International General Electric Company of New York Ltd and another v Commissioners of Customs and ExciseChancery DivisionYes[1962] Ch 784EnglandCited regarding the need to satisfy the court that it is appropriate to exercise its exceptional jurisdiction to make a final declaration on an interlocutory application.
Kon Yin Tong and another v Leow Boon Cher and othersHigh CourtYes[2011] SGHC 228SingaporeCited for the two main tests for insolvency: the cash flow test and the balance sheet test.
Seah Chee Wan and another v Connectus Group Pte LtdHigh CourtYes[2019] SGHC 228SingaporeCited for the definition of insolvency on the balance sheet test.
Living the Link Pte Ltd (in creditors’ voluntary liquidation) and others v Tan Lay Tin Tina and othersHigh CourtYes[2016] 3 SLR 621SingaporeCited for the definition of insolvency on the balance sheet test.
Phosagro Asia Pte Ltd v Piattchanine, IouriHigh CourtYes[2016] 5 SLR 1052SingaporeCited regarding the burden of proof under s 103 of the Evidence Act and the limited circumstances in which s 108 applies.
Surender Singh s/o Jagdish Singh v Li Man KayHigh CourtYes[2010] 1 SLR 428SingaporeCited regarding the burden of proof under s 103 of the Evidence Act and the limited circumstances in which s 108 applies.
In re Patrick and Lyon, LimitedChancery DivisionYes[1933] Ch 786EnglandCited to support the point that even a single transaction can amount to fraudulent trading.
Tang Yoke Kheng (trading as Niklex Supply Co) v Lek Benedict and othersCourt of AppealYes[2005] 3 SLR(R) 263SingaporeCited for the standard of proof for an intent to defraud and the substance of an intent to defraud.
R v GranthamCourt of AppealYes[1984] QB 675EnglandCited for the definition of intent to defraud a creditor.
Re Maidstone Buildings Provisions LtdHigh CourtYes[1971] 3 All ER 363EnglandCited for the principle that an omission to prevent fraudulent trading does not make a defendant knowingly a party to the fraudulent trading.
Tan Hung Yeoh v Public ProsecutorHigh CourtYes[1999] 2 SLR(R) 262SingaporeCited for the principle that actual knowledge is required for knowing participation in fraudulent trading.
Re Bank of Credit and Commerce International SA (in liquidation) (No 14); Morris and others v State Bank of IndiaHigh CourtYes[2004] 2 BCLC 236EnglandCited for the elements of knowing participation: participation and knowledge.
Tong Tien See Construction Pte Ltd (in liquidation) v Tong Tien See and othersHigh CourtYes[2001] 3 SLR(R) 887SingaporeCited to illustrate that the mere fact that a person is a director or other officer of a company does not mean that he is knowingly a party to everything that the company does.
Liquidators of Progen Engineering Pte Ltd v Progen Holdings LtdHigh CourtYes[2010] 4 SLR 1089SingaporeCited for the principle that directors have a fiduciary duty to take into account the interests of the company's creditors when making decisions for a company which is insolvent or nearing insolvency.
Prima Bulkship Pte Ltd (in creditors’ voluntary liquidation) and another v Lim Say Wan and anotherHigh CourtYes[2017] 3 SLR 839SingaporeCited for the principle that the plaintiff was not a creditor of IL at the material time; it became a creditor only by virtue of IL entering into the main charterparties.
Bumi Armada Offshore Holdings Ltd and another v Tozzi Srl (formerly known as Tozzi Industries SpA)High CourtYes[2019] 1 SLR 10SingaporeCited regarding the burden of proof and establishing a prima facie case.
Rahj Kamal bin Abdullah v Public ProsecutorHigh CourtYes[1997] 3 SLR(R) 227SingaporeCited for the principle that it is legitimate to draw an inference as to whether IL was trading fraudulently in or around July 2015 from IL’s conduct after July 2015.
Re Bank of Credit and Commerce International SA (in liquidation) (No 15); Morris and others v Bank of IndiaHigh CourtYes[2004] 2 BCLC 279EnglandCited for the principle that the knowledge which s 340(1) requires is knowledge contemporaneous with the fraudulent trading.
Ma Hongjin v SCP Holdings Pte LtdHigh CourtYes[2021] 1 SLR 304SingaporeCited for the principle that the standard of proof which the plaintiff must meet in a civil action is the same whether or not the defendant elects to call evidence.
Ma Hongjin v SCP Holdings Pte Ltd and anotherHigh CourtYes[2019] SGHC 277SingaporeCited for the conditions under which a plaintiff will succeed in a civil action whether or not a defendant elects to call evidence.
Thio Keng Poon v Thio Syn Pyn and others and another appealHigh CourtYes[2010] 3 SLR 143SingaporeCited for the principle that an adverse inference should not be drawn against the second defendant simply because he has elected to call no evidence.

13. Applicable Rules

Rule Name
Rules of Court O 88 r 2(1)
Rules of Court O 1 r 2(2)
Rules of Court O 28 r 8

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed) s 340(1)Singapore
Arbitration Act (Cap 10, 2002 Rev Ed) s 46Singapore
Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 69 r 14Singapore
Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018) s 238(1)Singapore
Interpretation Act (Cap 1, 2002 Rev Ed) s 16(1)(c)Singapore
Evidence Act (Cap 97, 1997 Rev Ed) s 103Singapore
Evidence Act (Cap 97, 1997 Rev Ed) s 108Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Fraudulent trading
  • Directors' liability
  • Companies Act
  • Judgment debt
  • Insolvency
  • Charterparties
  • Knowing participation
  • Balance sheet test
  • Cash flow test
  • Winding up

15.2 Keywords

  • Fraudulent trading
  • Directors liability
  • Companies Act
  • Singapore
  • Shipping
  • Insolvency
  • Civil Procedure

17. Areas of Law

Area NameRelevance Score
Fraudulent Trading85
Fraud and Deceit80
Company Law75
Insolvency Law65
Contract Law60
Civil Procedure50
Director's Duties50
Evidence40

16. Subjects

  • Company Law
  • Civil Procedure
  • Insolvency
  • Commercial Law