Song Jianbo v Sunmax Global Capital Fund 1: Creditor Funding Agreement & Insolvency Law
In the High Court of Singapore, Song Jianbo applied for an advantage under Section 204(3) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) concerning the winding up of Sunmax Global Capital Fund 1 Pte Ltd. The application sought priority in asset distribution under a Creditor's Funding Agreement. The court allowed the application, granting Song Jianbo priority over other unsecured creditors, including preferential creditors under s 203(1) of the IRDA, due to his willingness to fund the liquidator's investigative and recovery efforts when other creditors did not.
1. Case Overview
1.1 Court
General Division of the High Court of the Republic of Singapore1.2 Outcome
Application allowed.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Application by creditor Song Jianbo for advantage under s 204(3) of the IRDA, to recover assets of Sunmax Global Capital Fund 1 Pte Ltd.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Song Jianbo | Claimant | Individual | Application allowed | Won | |
| Sunmax Global Capital Fund 1 Pte Ltd (in compulsory liquidation) | Defendant | Corporation | Application allowed | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Goh Yihan | Judicial Commissioner | Yes |
4. Counsels
4. Facts
- The claimant, Song Jianbo, is a judgment creditor of Sunmax Global Capital Fund 1 Pte Ltd.
- The company was ordered to be wound up on 5 August 2022 upon the claimant's application.
- The claimant informed the liquidator of suspicious transactions that occurred before the winding up.
- The liquidator conducted preliminary investigations, including meetings with a former director, Mr. Li Hua.
- The liquidator requested creditors to provide funding for investigative and recovery efforts.
- The claimant offered to fund the liquidator's efforts and provide an indemnity for costs and expenses.
- No other creditors offered funding, leading the liquidator to agree to the claimant's request for an advantage under the IRDA.
5. Formal Citations
- Song Jianbo v Sunmax Global Capital Fund 1 Pte Ltd (in compulsory liquidation), Originating Application No 670 of 2022, [2022] SGHC 312
6. Timeline
| Date | Event |
|---|---|
| Insolvency, Restructuring and Dissolution Act 2018 enacted | |
| Sunmax Global Capital Fund 1 Pte Ltd ordered to be wound up | |
| Liquidator met with Mr. Li Hua, former director of the Company | |
| Liquidator met with Mr. Li Hua, former director of the Company | |
| Liquidator wrote to the Company’s creditors | |
| Liquidator wrote to the Company’s creditors | |
| Claimant responded through his solicitors | |
| Claimant responded through his solicitors | |
| Liquidator informed the claimant that none of the Company’s other creditors had offered funding | |
| Hearing before the court; application allowed | |
| Grounds of Decision issued |
7. Legal Issues
- Funding by creditors in winding up
- Outcome: The court granted the claimant an advantage over other creditors, including preferential creditors, in the distribution of assets recovered through the creditor's funding agreement.
- Category: Substantive
8. Remedies Sought
- An order under s 204(3) of the Insolvency, Restructuring and Dissolution Act 2018 to be given an advantage over other creditors.
9. Cause of Actions
- No cause of actions
10. Practice Areas
- Insolvency
- Liquidation
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re Vanguard Energy Pte Ltd | High Court | Yes | [2015] 4 SLR 597 | Singapore | Cited to discuss s 328(10) of the Companies Act and the reluctance of creditors to provide funding without assurance of advantageous distribution. |
| Re Ken Godfrey Pty Ltd (in liq) | Unspecified | Yes | (1994) 14 ACSR 610 | Australia | Cited for the policy behind the Australian equivalent of s 204 of the IRDA, which is to encourage creditors to indemnify liquidators. |
| State Bank of New South Wales and Another v Brown (as liq of Parkston Ltd (in liq)) and Others | New South Wales Court of Appeal | Yes | (2001) 38 ACSR 715 | Australia | Cited to elaborate on the public purposes involved in encouraging the pursuit of claims by liquidators. |
| Household Financial Services Pty Ltd v Chase Medical Centre Pty Ltd | Unspecified | Yes | (1995) 18 ACSR 294 | Australia | Cited for the non-exhaustive list of factors that the court should take into account when exercising its discretion under s 564 of the Australian Corporations Act. |
| Hamilton, in the matter of Aquagenics Pty Ltd (in liq) v Tasmanian Water & Sewerage Corporation Pty Ltd | Federal Court of Australia | Yes | [2022] FCA 530 | Australia | Cited to show that the list of factors set out in Household Financial Services remains relevant within the contemporary Australian jurisprudence. |
| Re Woodgate (in his capacity as trustee in bankruptcy of the bankrupt estate of Eaton) | Federal Court of Australia | Yes | [2010] FCA 550 | Australia | Cited for the relevant factors to be considered in the exercise of discretion conferred by s 109(10) of the Australian Bankruptcy Act 1966. |
| Lombe, Re Babcock & Brown Ltd (in liq) | Federal Court of Australia | Yes | [2012] FCA 107 | Australia | Cited for the orthodox practice of a liquidator seeking funding from creditors to meet the costs and expenses associated with preliminary investigations. |
| Bell Group Ltd (in liq) v Westpac Banking Corporation | Unspecified | Yes | (1996) 18 WAR 21 | Australia | Cited to show that the Australian court will only hear the applications after the successful outcome of the funded proceedings and has no jurisdiction to make an order in advance. |
| Deputy Commissioner of Taxation v Currockbilly Pty Ltd | Unspecified | Yes | (2002) 172 FLR 99 | Australia | Cited to show that the Australian court will only hear the applications after the successful outcome of the funded proceedings and has no jurisdiction to make an order in advance. |
| Re Russell (in his capacity as official liquidator) Parkston Ltd (in liq) | Unspecified | Yes | (2000) 35 ACSR 114 | Australia | Cited for the time at which to assess the risk undertaken, which should be at the time a commitment is first made to fund that litigation and thereafter throughout the funding period. |
| Low v Barnet (Trustee) | Federal Court of Australia | Yes | [2017] FCAFC 60 | Australia | Cited to show that there is a real risk for creditors that the amounts which they ventured would not be recovered when the liquidator had little information to support the potential claims. |
| Re Shepherds Producers Co-Operative Ltd (in liq) | New South Wales Supreme Court | Yes | [2012] NSWSC 390 | Australia | Cited for the granting of an order for the funding creditors to be given an advantage pursuant to s 564 of the Australian Corporations Act because the funding was provided by funding creditors at an early stage. |
| Jarbin Pty Ltd v Clutha Ltd (In liq) | Supreme Court of New South Wales | Yes | (2004) 208 ALR 242 | Australia | Cited for the public interest in encouraging a creditor to provide funding when there is some allegation of misfeasance by the former director of the company. |
| Re Proficient Building Company Pty Ltd | Supreme Court of New South Wales | Yes | (2011) 87 ACSR 183 | Australia | Cited for the public interest in encouraging a creditor to provide funding when there is some allegation of misfeasance by the former director of the company. |
| Re Glenisia Investments Pty Ltd (in liq) | Unspecified | Yes | (1995) 19 ACSR 84 | Australia | Cited to show that whether or not all creditors were offered an equal opportunity to provide funding is a relevant consideration when the court exercises its discretion. |
| Allquip (WA) Pty Ltd (in liq) v Allan | Unspecified | Yes | (1997) 25 ACSR 765 | Australia | Cited to show that whether or not all creditors were offered an equal opportunity to provide funding is a relevant consideration when the court exercises its discretion. |
| Re Home Corp Projects | Supreme Court of New South Wales | Yes | [2002] NSWSC 879 | Australia | Cited to show that on some occasions, the court may conclude that the risk assumed by the indemnifying creditor was modest at best. |
| Australia and New Zealand Banking Group Ltd v TJF EBC Pty Ltd | Supreme Court of New South Wales | Yes | [2006] NSWSC 25 | Australia | Cited to show that the court may, under s 564, make an order that causes the creditor chosen for preferred treatment to rank ahead of any one or more of the creditors having claims within the s 556(1) categories. |
| Deputy Commissioner of Taxation v Vintage Gold Investments Pty Ltd (in liq) | Federal Court of Australia | Yes | [2009] FCA 967 | Australia | Cited to show that the Australian courts have gone so far as to make an order under s 564 of the Australian Corporations Act to confer priority on the indemnifying creditor even over the liquidator’s own cost and expenses. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Insolvency, Restructuring and Dissolution Act 2018 | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Insolvency, Restructuring and Dissolution Act 2018
- Winding up
- Creditor's Funding Agreement
- Liquidator
- Indemnity
- Recovered Assets
- Preferential Creditors
15.2 Keywords
- Insolvency
- Winding up
- Creditor funding
- IRDA
- Advantage
- Liquidation
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Insolvency Law | 95 |
| Winding Up | 95 |
| Bankruptcy | 60 |
| Company Law | 40 |
| Civil Procedure | 30 |
16. Subjects
- Insolvency
- Corporate Law
- Funding Agreements