Feima International v Kyen Resources: Proof of Debt in Liquidation Dispute

Feima International (Hongkong) Limited (in liquidation) applied to the General Division of the High Court of the Republic of Singapore to reverse the decision of the liquidators of Kyen Resources Pte Ltd (in liquidation) to reject Feima's proof of debt. The court, presided over by Judicial Commissioner Goh Yihan, partially allowed the application, admitting parts of Feima's proof of debt while affirming the rejection of claims related to a deed of assignment. The case involved issues of insolvency law, proof of evidence, and the right of set-off.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Appeal Allowed in Part

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Feima International's proof of debt against Kyen Resources was partially allowed. The court addressed the liquidator's rejection and counterclaims.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Goh Thien PhongDefendantIndividualCounterclaim DismissedLost
Chan Kheng TekDefendantIndividualCounterclaim DismissedLost
Feima International (Hongkong) Limited (in liquidation)PlaintiffCorporationAppeal Allowed in PartPartial
Kyen Resources Pte Ltd (in liquidation)DefendantCorporationCounterclaim DismissedLost

3. Judges

Judge NameTitleDelivered Judgment
Goh YihanJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Tan Kah WaiShook Lin & Bok LLP
Chan Ming Onn DavidShook Lin & Bok LLP
Fong Zhiwei DarylShook Lin & Bok LLP
Lai Wei Kang LouisShook Lin & Bok LLP
Chew Jing WeiAllen & Gledhill LLP
Yeo Alexander Lawrence Han TiongAllen & Gledhill LLP

4. Facts

  1. Feima submitted a Proof of Debt for USD 49,355,996.30 to Kyen's liquidators.
  2. The Proof of Debt included inter-company payments and debts from the sale and purchase of goods.
  3. Kyen's liquidators rejected the Proof of Debt, citing counterclaims and insufficient supporting documents.
  4. Feima clarified that it was not claiming USD 16,818,150.82 of the intercompany claims due to a deed of assignment.
  5. Kyen and Feima shared common directors and had a management agreement.
  6. Kyen's liquidators identified large transactions where payments were made to third parties without clear consideration.
  7. Feima's audited financial statements for 2018 had a disclaimer of opinion from the auditors.

5. Formal Citations

  1. Feima International (Hongkong) Ltd (in liquidation)vKyen Resources Pte Ltd (in liquidation) and others, Originating Summons No 828 of 2021, [2022] SGHC 304

6. Timeline

DateEvent
Feima Liquidators submitted the Proof of Debt with the Kyen Liquidators
Kyen Liquidators replied to state that it is insufficient for Feima to rely merely on the Statement of Affairs of Kyen as proof of the debt
Kyen Liquidators' solicitors replied to say that there remains insufficient evidence for them to admit Feima’s claim
Feima provided relevant pages from Feima’s audited financial statements and detailed ledgers
Kyen Liquidators’ solicitors wrote to Feima, SZFM, and Shanghai Yinjun Industry Co Ltd to raise the issue of the allegedly unexplained Third Party Transactions
Kyen Liquidators’ solicitors wrote to TNTL without providing any of the information requested
Kyen Liquidators stated that the entirety of the Proof of Debt had been rejected
Originating Summons No 828 of 2021 filed
Judgment reserved
Judgment delivered

7. Legal Issues

  1. Proof of Debt
    • Outcome: The court partially reversed the liquidators' decision to reject Feima's proof of debt, admitting parts of the debt while affirming the rejection of claims related to a deed of assignment.
    • Category: Substantive
    • Sub-Issues:
      • Rejection of proof of debt
      • Admissibility of proof of debt
  2. Insolvency Set-Off
    • Outcome: The court held that Insolvency Set-off cannot be invoked in the present case as the defendants never ran their case on the basis that there was a set-off.
    • Category: Substantive
    • Sub-Issues:
      • Mutual credits
      • Mutual debts
      • Mutual dealings
  3. Liquidator's Quasi-Judicial Role
    • Outcome: The court clarified the scope of the liquidator's quasi-judicial role in adjudicating proofs of debt, emphasizing the need for impartiality and fairness.
    • Category: Procedural
    • Sub-Issues:
      • Duty to admit true liabilities
      • Power to investigate claims
  4. Dishonest Assistance
    • Outcome: The court did not rule on the merits of the dishonest assistance claim, finding that it was not appropriate to adjudicate it in the context of the proof of debt application.
    • Category: Substantive
    • Sub-Issues:
      • Knowledge of breach of trust
      • Assistance in breach
  5. Knowing Receipt
    • Outcome: The court did not rule on the merits of the knowing receipt claim, finding that it was not appropriate to adjudicate it in the context of the proof of debt application.
    • Category: Substantive
    • Sub-Issues:
      • Receipt of trust property
      • Knowledge of breach of trust

8. Remedies Sought

  1. Reversal of rejection of proof of debt
  2. Admission of proof of debt in full
  3. Costs of proceedings

9. Cause of Actions

  • Breach of Contract
  • Dishonest Assistance
  • Knowing Receipt

10. Practice Areas

  • Liquidation
  • Commercial Litigation

11. Industries

  • Commodities Trading
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Fustar Chemicals Ltd (Hong Kong) v Liquidator of Fustar Chemicals Pte LtdCourt of AppealYes[2009] 4 SLR(R) 458SingaporeCited for the principle that the liquidator’s duty is to ensure that the assets of the company are only distributed to the creditors who have debts that were genuinely created and remain legally due.
Blasco, Martinez Gemma v Ee Meng Yen Angela and another and another matterHigh CourtYes[2021] 3 SLR 1360SingaporeCited for the principle that the liquidator is not bound by the audited accounts but is entitled to go behind them to determine the veracity of the debt claimed.
Westpac Banking Corporation v TotterdellN/AYes[1997] 142 FLR 137N/ACited for the principle that a creditor bears the burden of proving the debt on a balance of probabilities.
The Trustee in Bankruptcy of Lo Siu Fai Louis v TooheyN/AYes[2005] 4 HKC 51Hong KongCited for the principle that a creditor bears the burden of proving the debt on a balance of probabilities.
Tanning Research Laboratories v O’BrienHigh Court of AustraliaYes[1990] 91 ALR 180AustraliaCited regarding the liquidator's ability to reject a proof of debt if the liability is not a true liability of the company.
Wren v MahonyHigh Court of AustraliaYes(1972) 126 CLR 212AustraliaCited for the grounds on which a court of bankruptcy will inquire into the validity of a judgment debt in the adjudication of a bankruptcy application.
Castleplex Pty Ltd (in liq), Re; Labaj v HambletonN/AYes[2010] QCA 59N/ACited for the principle that where the liquidator seeks to set-off a creditor’s debt by way of a counterclaim, the burden is on the liquidator to prove on a balance of probabilities its counterclaim.
Re JPF Clarke (Construction) Ltd (in a company voluntary arrangement) Maze Inns Ltd and others v Hunt and othersN/AYes[2019] Lexis Citation 379N/ACited for the principle that where the liquidator seeks to set-off a creditor’s debt by way of a counterclaim, the burden is on the liquidator to prove on a balance of probabilities its counterclaim.
Lim Siew Soo v Sembawang Engineers and Constructors Pte Ltd (in compulsory liquidation) (Metax Eco Solutions Pte Ltd, intervener)High CourtYes[2021] 4 SLR 556SingaporeCited for the principle that the procedures for adjudication of proof of debts only operate to resolve claims against the Company and have no application to cross-claims by the Company.
Fustar Chemicals Ltd v Ong Soo Hwa (liquidator of Fustar Chemicals Pte Ltd)High CourtYes[2009] 1 SLR(R) 844SingaporeCited for the explanation of the quasi-judicial role of a liquidator.
Re National Wholemeal Bread and Biscuit CoN/AYes[1892] 2 Ch 457EnglandCited for the principle that the liquidator can consider any set-off asserted.
Re Menastar Finance Ltd (in liq), Menastar Ltd v SimonN/AYes[2003] BCLC 338N/ACited for the principle that the power of a liquidator is no different from that of the court itself, since the liquidator, in deciding whether to accept or reject a creditor’s proof in whole or in part, is acting in a quasi judicial capacity.
ERPIMA SA v Chee Yoh Chuang and anotherHigh CourtYes[1997] 1 SLR(R) 923SingaporeCited for the principle that the liquidator’s quasi-judicial role is as if he is sitting in judgment like a judicial officer and cannot act unjudicially, capriciously or arbitrarily.
George Raymond Zage III and another v Ho Chi Kwong and anotherCourt of AppealYes[2010] 2 SLR 589SingaporeCited for the test of dishonest assistance.
Combe v CombeEnglish Court of AppealYes[1951] 2 KB 215EnglandCited for the principle that the adjudication procedure can be used as a shield in relation to claims against the insolvent company, it cannot be used as a sword against creditors in asserting the insolvent company’s own counterclaims.
CIMB Bank Bhd v Italmatic Tyre & Retreading Equipment (Asia) Pte LtdHigh CourtYes[2021] 4 SLR 883SingaporeCited for the principle that Insolvency Set-off is mandatory and parties are not permitted contractually to exclude its effect, and it is an automatic self-executing procedural directive which takes effect without the need for further intervention and arises by operation of law.
Manson v Smith (liquidator of Thomas Christy Ltd)English Court of AppealYes[1997] 2 BCLC 161EnglandCited for the principle that liability arising from misfeasance proceedings, such as those involving a misappropriation of funds belonging to an insolvent company or conversion of the company’s property, is not a claim arising from mutual dealings and Insolvency Set-off would not be applicable.
Smith (Administrator of Cosslett (Contractors) Ltd) v Bridgend County Borough CouncilHouse of LordsYes[2002] 1 AC 336EnglandCited for the principle that a conversion of property also cannot constitute a “dealing”.
Parakou Investment Holdings Pte Ltd and another v Parakou Shipping Pte Ltd (in liquidation) and other appealsCourt of AppealYes[2018] 1 SLR 271SingaporeCited for the principle that statutory set-off is not available when the debt owed by the counterparty to the debtor is based on the misfeasance or other wrongdoing by the counterparty.
Goldtrail Travel Ltd (in liquidation) v Aydin and othersN/AYes[2015] 1 BCLC 89N/ACited for the principle that the court would be loath to allow a dishonest assistor in effect to obtain pound for pound reimbursement.
Goldtrail Travel Ltd (in liquidation) v Aydin and othersN/AYes[2016] 1 BCLC 635N/ACited as the judgment decision overturned on appeal on a separate factual point.
Re Ice-Mack Pte Ltd (in liquidation)High CourtYes[1989] 2 SLR(R) 283SingaporeCited for the principle that it was necessary at the very least to put the applicant to strict proof of its assertions given the close relationship between two associate companies.
Capital Realty Pte Ltd v Chip Thye Enterprises (Pte) LtdCourt of AppealYes[2000] 3 SLR(R) 419SingaporeCited for the principle that an audit confirmation was strong prima facie evidence of debt.
Re Adam Holdings LtdHong Kong High CourtYes[1985] 2 HKC 608Hong KongCited as an example of when a court’s suspicion was triggered due to discrepancies in the accounts.
Grand Gain Investment Ltd v Cosimo Borrelli and anotherHong Kong High CourtYes[2006] HKCU 872Hong KongCited for the principle that weight should be given to the fact that the accounts concerned have been audited.

13. Applicable Rules

Rule Name
Companies (Winding Up) Rules (Cap 50, R 1, 2006 Ed)

14. Applicable Statutes

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

15. Key Terms and Keywords

15.1 Key Terms

  • Proof of Debt
  • Liquidation
  • Intercompany Claims
  • Purchase Debts
  • Insolvency Set-Off
  • Dishonest Assistance
  • Knowing Receipt
  • Third Party Transactions
  • Management and Administrative Services Agreement
  • Deed of Assignment
  • Liquidator
  • Audited Financial Statements

15.2 Keywords

  • proof of debt
  • liquidation
  • insolvency
  • winding up
  • intercompany debt
  • set-off
  • Singapore
  • High Court

17. Areas of Law

Area NameRelevance Score
Insolvency Law95
Winding Up95
Insolvency Set-off70
Debt Recovery60
Company Law60
Evidence50
Evidence Law50

16. Subjects

  • Insolvency Law
  • Company Law
  • Civil Procedure