Rothstar Group v Leow Quek Shiong: Avoidance of Transactions at Undervalue and Voluntary Conveyances
Rothstar Group Limited appealed against the High Court's decision to set aside a legal mortgage as a transaction at an undervalue. The Court of Appeal dismissed Rothstar's appeals, ordering the discharge of the Legal Mortgage. The court clarified the interpretation and application of Section 98(3)(c) of the Bankruptcy Act, addressing whether granting security for a third party's debt constitutes a transaction at an undervalue and voluntary conveyance to defraud creditors.
1. Case Overview
1.1 Court
Court of Appeal of the Republic of Singapore1.2 Outcome
Rothstar's appeals dismissed; Legal Mortgage discharged.
1.3 Case Type
Civil
1.4 Judgment Type
Judgment
1.5 Jurisdiction
Singapore
1.6 Description
Appeal concerning a legal mortgage set aside as a transaction at an undervalue. The court clarified principles for avoidance of transactions.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Rothstar Group Limited | Appellant, Plaintiff, Defendant | Corporation | Appeal Dismissed | Lost | Bazul Ashhab bin Abdul Kader, Chan Cong Yen Lionel, Foo Chuan Min Jerald, Caleb Tan Jia Chween, Tan Wen Cheng Adrian, Tan Choon Yuan Delson, Theenan Narendra Mudaliar |
| Leow Quek Shiong | Respondent, Plaintiff, Defendant | Individual | Judgment in favor of Respondent | Won | Lee Eng Beng SC, Sim Kwan Kiat, Cheong Tian Ci Torsten, Wong Ye Yang |
| Lin Yueh Hung | Respondent, Plaintiff, Defendant | Individual | Judgment in favor of Respondent | Won | Lee Eng Beng SC, Chua Beng Chye, Raelene Su-Lin Pereira, Yeoh Su Yi, Foung Han Peow, Cheong Tian Ci Torsten |
| Chee Yoh Chuang | Respondent, Plaintiff, Defendant | Individual | Judgment in favor of Respondent | Won | Lee Eng Beng SC, Chua Beng Chye, Raelene Su-Lin Pereira, Yeoh Su Yi, Foung Han Peow, Cheong Tian Ci Torsten |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Andrew Phang Boon Leong | Justice of the Court of Appeal | No |
| Steven Chong | Justice of the Court of Appeal | Yes |
| Chao Hick Tin | Senior Judge | No |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Bazul Ashhab bin Abdul Kader | Oon & Bazul LLP |
| Chan Cong Yen Lionel | Oon & Bazul LLP |
| Foo Chuan Min Jerald | Oon & Bazul LLP |
| Caleb Tan Jia Chween | Oon & Bazul LLP |
| Tan Wen Cheng Adrian | August Law Corporation |
| Tan Choon Yuan Delson | August Law Corporation |
| Theenan Narendra Mudaliar | August Law Corporation |
| Lee Eng Beng SC | Rajah & Tann Singapore LLP |
| Sim Kwan Kiat | Rajah & Tann Singapore LLP |
| Cheong Tian Ci Torsten | Rajah & Tann Singapore LLP |
| Wong Ye Yang | Rajah & Tann Singapore LLP |
| Chua Beng Chye | Rajah & Tann Singapore LLP |
| Raelene Su-Lin Pereira | Rajah & Tann Singapore LLP |
| Yeoh Su Yi | Rajah & Tann Singapore LLP |
| Foung Han Peow | Rajah & Tann Singapore LLP |
4. Facts
- AIPL and Rothstar entered into a Loan Agreement where Rothstar agreed to extend a loan of $5m to AIPL.
- As security for the Loan, AIPL was to procure a third-party equitable mortgage in respect of the Property in favor of Rothstar.
- NSP and Pictorial granted an Equitable Mortgage over the Property to Rothstar as security for AIPL’s obligations.
- AIPL failed to make repayment of the Loan by the stipulated date.
- NSP and Pictorial executed the Legal Mortgage as security for all sums due and payable by them and/or AIPL to Rothstar.
- A bankruptcy order was made against NSP and private trustees in bankruptcy were appointed.
- The Liquidator and the Private Trustees applied for the Legal Mortgage to be set aside.
5. Formal Citations
- Rothstar Group Ltd v Leow Quek Shiong and other appeals, , [2022] SGCA 25
- Rothstar Group Limited v Leow Quek Shiong, 36 of 2021, Civil Appeal No 36 of 2021
- Leow Quek Shiong v Rothstar Group Limited, 87 of 2021, Originating Summons No 87 of 2021
- Rothstar Group Limited v Lin Yueh Hung, 37 of 2021, Civil Appeal No 37 of 2021
- Chee Yoh Chuang v Rothstar Group Limited, 89 of 2021, Originating Summons No 89 of 2021
- Rothstar Group Limited v Lin Yueh Hung, 38 of 2021, Civil Appeal No 38 of 2021
- Rothstar Group Limited v Chee Yoh Chuang, 78 of 2021, Originating Summons No 78 of 2021
- Rothstar Group Ltd v Chee Yoh Chuang and another and other matters, , [2021] SGHC 176
6. Timeline
| Date | Event |
|---|---|
| Loan Agreement signed between AIPL and Rothstar. | |
| NSP and Pictorial granted an Equitable Mortgage over the Property to Rothstar. | |
| AIPL failed to make repayment of the Loan. | |
| Deadline for repayment of the Loan was extended. | |
| Deadline for repayment of the Loan was extended. | |
| Rothstar, AIPL, Pictorial and NSP entered into a Deed of Discharge and Termination. | |
| NSP and Pictorial executed the Legal Mortgage. | |
| The Legal Mortgage was registered. | |
| NSP absconded from Singapore. | |
| AIPL failed to repay the Loan. | |
| A bankruptcy order was made against NSP. | |
| The Private Trustees lodged a caveat against the Property. | |
| The Private Trustees applied to compulsorily wind up Pictorial. | |
| Pictorial was ordered to be wound up. | |
| The Liquidator lodged a further caveat against the Property. | |
| The Insolvency, Restructuring and Dissolution Act 2018 came into operation. | |
| AIPL's judicial managers filed a winding up application. | |
| AIPL was wound up. | |
| The Liquidator and the Private Trustees applied for the Legal Mortgage to be set aside. | |
| Rothstar applied for the Private Trustees to show cause as to why the Private Trustees’ Caveat should not be removed. | |
| Hearing before the Court of Appeal. | |
| Judgment reserved. |
7. Legal Issues
- Whether the Legal Mortgage was a transaction at an undervalue within s 98 of the BA
- Outcome: The Court of Appeal held that the Legal Mortgage was a transaction at an undervalue under s 98(3)(c) of the BA.
- Category: Substantive
- Sub-Issues:
- Grant of security for an existing debt
- Insolvency at the time of granting the Legal Mortgage
- Appropriate order under s 98(2) of the BA
- Whether the Legal Mortgage was a voluntary conveyance to defraud creditors under s 73B(1) of the CLPA
- Outcome: The Court of Appeal held that the Legal Mortgage was not a voluntary conveyance to defraud creditors.
- Category: Substantive
- Whether the Private Trustees’ Caveat ought to be removed
- Outcome: The Court of Appeal dismissed Rothstar’s application for the removal of the Private Trustees’ Caveat.
- Category: Procedural
8. Remedies Sought
- Setting aside the Legal Mortgage
- Delivery of vacant possession of the Property
9. Cause of Actions
- Avoidance of transactions at an undervalue
- Voluntary conveyance to defraud creditors
10. Practice Areas
- Appeals
- Avoidance of Transactions
- Transactions at an Undervalue
- Caveats
- Conveyance
- Voluntary Conveyances
- Mortgages
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re MC Bacon Ltd | English Court | Yes | [1990] BCLC 324 | England and Wales | Cited for the principle that the grant of security for an existing debt does not constitute a transaction at an undervalue. |
| Liew Kit Fah and others v Koh Keng Chew and others | Court of Appeal | Yes | [2020] 1 SLR 275 | Singapore | Cited for the principle that an appellate court will generally be open to consider new arguments where these involve questions of law that can be answered without further evidence. |
| Mercator & Noordstar NV v Velstra Pte Ltd (in liquidation) | Court of Appeal | Yes | [2003] 4 SLR(R) 667 | Singapore | Cited for the policy object of Section 98 of the Bankruptcy Act, which is to protect the interest of the general body of creditors against a diminution of assets. |
| Velstra Pte Ltd v Dexia Bank NV | Court of Appeal | Yes | [2005] 1 SLR(R) 154 | Singapore | Cited to demonstrate that consideration under Section 98(3)(c) need not be received directly by the grantor. |
| Re Thoars (decd) (No 2); Reid v Ramlort Ltd (No 2) | Court of Appeal of England and Wales | Yes | [2005] 1 BCLC 331 | England and Wales | Cited to illustrate that consideration received by a third party can nevertheless have value to the grantor, and it is this latter value that is relevant in the value comparison exercise under s 98(3)(c). |
| Feakins and another v Department for Environment, Food and Rural Affairs | English Court of Appeal | Yes | [2005] EWCA Civ 1513 | England and Wales | Cited as an example where the consideration received by the grantor was the discharge of his indebtedness to a bank. |
| Buildspeed Construction Pte Ltd (in liquidation) v Theme Corp Pte Ltd and another | High Court | Yes | [2000] 1 SLR(R) 287 | Singapore | Cited as an example where the insolvent company had entered into a novation agreement with another company. |
| Phillips and another v Brewin Dolphin Bell Lawrie Ltd and another | House of Lords | Yes | [2001] 1 WLR 143 | United Kingdom | Cited as an example where the relevant consideration was held not to be measurable in money or money’s worth. |
| Hill v Spread Trustee Co Ltd and another | English Court of Appeal | Yes | [2007] 1 WLR 2404 | England and Wales | Cited for the different approach taken by the English Court of Appeal where the insolvent individual had granted various charges as security for loans made to him by his settlement trustees. |
| Encus International Pte Ltd (in compulsory liquidation) v Tenacious Investment Pte Ltd and others | High Court | Yes | [2016] 2 SLR 1178 | Singapore | Cited for the High Court's obiter preference for the approach in Hill because, “[w]hile no doubt rare, it is possible that a situation will arise in which security is given without fresh consideration”. |
| Burnden Holdings (UK) Ltd (in liquidation) and another v Fielding and another | English High Court | Yes | [2019] EWHC 1566 (Ch) | England and Wales | Cited as an example where the principle in MC Bacon has been followed in the UK. |
| DBS Bank Ltd v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management)) | Court of Appeal | Yes | [2011] 4 SLR 948 | Singapore | Cited for the principle that the party who gives an unfair preference must have been influenced by a subjective desire to prefer the recipient. |
| Cupid Jewels Pte Ltd v Orchard Central Pte Ltd and another appeal | Court of Appeal | Yes | [2014] 2 SLR 156 | Singapore | Cited for the principle that estoppel cannot operate where it would act in the face of a statute and effectively allow a state of affairs which the law has positively declared not to subsist. |
| The Enterprise Fund III Ltd and others v OUE Lippo Healthcare Ltd (formerly known as International Healthway Corp Ltd) | Court of Appeal | Yes | [2019] 2 SLR 524 | Singapore | Cited for the principle that estoppel cannot operate where it would act in the face of a statute and effectively allow a state of affairs which the law has positively declared not to subsist. |
| Quah Kay Tee v Ong and Co Pte Ltd | High Court | Yes | [1996] 3 SLR(R) 637 | Singapore | Cited for the applicable principles for voluntary conveyance 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 applicable principles for voluntary conveyance to defraud creditors under s 73B(1) of the CLPA. |
| Commissioner of Taxation v Oswal (No 6) | Federal Court of Australia | Yes | (2016) 339 ALR 560 | Australia | Cited for the argument that a mortgage granted to secure a loan extended to a third party is a conveyance for no or nominal consideration. |
| Power Knight Pte Ltd v Natural Fuel Pte Ltd (in compulsory liquidation) and others | High Court | Yes | [2010] 3 SLR 82 | Singapore | Cited for the argument that the Property, as an asset secured by the Legal Mortgage, fell outside the general pool of assets available to the unsecured creditors. |
| Tan Yow Kon v Tan Swat Ping and others | High Court | Yes | [2006] 3 SLR(R) 881 | Singapore | Cited for the principle of weighing the balance of convenience. |
| Christie, Hamish Alexander (as private trustee in bankruptcy of Tan Boon Kian) v Tan Boon Kian and others | High Court | Yes | [2021] 4 SLR 809 | Singapore | Cited for the principle that Section 98 does not provide that an undervalued transaction thereunder is void or, for that matter, voidable. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court (2014 Rev Ed) |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Bankruptcy Act (Cap 20, 2009 Rev Ed) | Singapore |
| Companies Act (Cap 50, 2006 Rev Ed) | Singapore |
| Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018) | Singapore |
| Land Titles Act (Cap 157, 2004 Rev Ed) | Singapore |
| Conveyancing and Law of Property Act (Cap 61, 1994 Rev Ed) | Singapore |
| s 98 of the BA | Singapore |
| s 73B(1) of the CLPA | Singapore |
| s 127(1) of the LTA | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Transaction at an undervalue
- Voluntary conveyance
- Legal Mortgage
- Equitable Mortgage
- Insolvency
- Bankruptcy
- Liquidation
- Caveat
- Security
- Loan Agreement
15.2 Keywords
- Transaction at undervalue
- Legal mortgage
- Bankruptcy Act
- Insolvency
- Voluntary conveyance
- Caveat
16. Subjects
- Insolvency
- Bankruptcy
- Property Law
- Mortgages
- Civil Procedure
17. Areas of Law
- Insolvency Law
- Civil Procedure
- Land Law
- Bankruptcy Law
- Company Law
- Property Law