Xiang Da Marine v Zhang Xianming: Striking Out Claims for Transactions at Undervalue
In Xiang Da Marine Pte Ltd (in creditors’ voluntary liquidation) and another v Zhang Xianming and others, the General Division of the High Court of Singapore considered an application to strike out claims related to transactions at an undervalue. The claimants, Xiang Da Marine and its liquidator, alleged that the defendants, Zhang Xianming, Wu Jianshi, Fu Ning Marine Pte Ltd, Ji Ning Marine Pte Ltd, and Qing Ning Marine Pte Ltd, were involved in transactions where Xiang Da's assets were transferred at an undervalue. The court struck out the claims, finding that the pleadings disclosed no reasonable cause of action and were legally unsustainable.
1. Case Overview
1.1 Court
General Division of the High Court1.2 Outcome
Claimants' claims in OC 194 struck out in their entirety.
1.3 Case Type
Civil
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Singapore court strikes out claims against defendants for transactions at an undervalue, finding the pleadings disclosed no reasonable cause of action.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Farooq Ahmad Mann | Claimant | Individual | Claim Dismissed | Dismissed | |
| Xiang Da Marine Pte Ltd (in creditors’ voluntary liquidation) | Claimant | Corporation | Claim Dismissed | Dismissed | |
| Zhang Xianming | Defendant | Individual | Claims Struck Out | Won | |
| Wu Jianshi | Defendant | Individual | Claims Struck Out | Won | |
| Fu Ning Marine Pte Ltd | Defendant | Corporation | Claims Struck Out | Won | |
| Ji Ning Marine Pte Ltd | Defendant | Corporation | Claims Struck Out | Won | |
| Qing Ning Marine Pte Ltd | Defendant | Corporation | Claims Struck Out | Won |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Perry Peh | Assistant Registrar | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Anthony Soh | Alcove Law LLC |
| Iris Ng | Helmsman LLC |
| Una Khng | Helmsman LLC |
| Huang Peide | Helmsman LLC |
4. Facts
- Xiang Da Marine was in the business of freight and ship management.
- Xiang Da was placed into creditors’ voluntary liquidation on 21 February 2020.
- Zhang and Wu caused Xiang Da to enter into agreements for the transfer of three vessels to Fu Ning, Ji Ning and Qing Ning.
- The vessels were allegedly sold at a price of US$19,929,112.09, US$19,353,252.05 and US$18,110,117.11, respectively.
- No actual transfer of cash was made for the sale.
- The consideration for the transfer of the vessels was based on their respective net book values.
- Accounting entries were purportedly made to the accounts of Xiang Da and CSC Oil to set off against amounts that were allegedly owed by Xiang Da to CSC Oil and/or others.
5. Formal Citations
- Xiang Da Marine Pte Ltd (in creditors’ voluntary liquidation) and another v Zhang Xianming and others, Originating Claim No 194 of 2023 (Summonses Nos 1965 and 1967 of 2023), [2023] SGHCR 15
6. Timeline
| Date | Event |
|---|---|
| Xiang Da Marine Pte Ltd placed into creditors’ voluntary liquidation | |
| CSC transferred all its shares in Xiang Da to Link Height Limited | |
| Agreements entered into for the transfer of vessels | |
| Ningbo Group Co Ltd commenced HC/ADM 56/2017 against Xiang Da | |
| Xiang Da commenced Third Party Proceedings against Clearlake Shipping Pte Ltd and Gunvor Singapore Pte Ltd | |
| Deed of Settlement entered into between Xiang Da and Ningbo | |
| Hearing date | |
| Judgment reserved |
7. Legal Issues
- Striking out claims
- Outcome: The court allowed the application to strike out the claims.
- Category: Procedural
- Sub-Issues:
- Disclosure of reasonable cause of action
- Abuse of process
- Interests of justice
- Transactions at an undervalue
- Outcome: The court found that the claims were legally unsustainable and disclosed no reasonable cause of action.
- Category: Substantive
- Sub-Issues:
- Consideration
- Insolvency
- Net book value vs market value
8. Remedies Sought
- Declaration that Zhang and Wu acted in breach of their fiduciary and/or statutory duties
- Declaration that the Defendants are liable for knowing receipt and/or dishonest assistance
- Order for the Transactions to be declared void
9. Cause of Actions
- Breach of fiduciary and/or statutory duties
- Knowing receipt
- Dishonest assistance
- Fraudulent trading
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- Shipping
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Ho Wing On Christopher and others v ECRC Land Pte Ltd (in liquidation) | High Court | Yes | [2006] 4 SLR(R) 817 | Singapore | Cited to support the proposition that C&G are the real claimants in OC 194. |
| Mercator & Noordstar NV v Velstra Pte Ltd (in liquidation) | High Court | Yes | [2003] 4 SLR(R) 667 | Singapore | Cited for the elements of a transaction at an undervalue under s 98(3) of the Bankruptcy Act. |
| Iskandar bin Rahmat and others v Attorney-General and another | Court of Appeal | Yes | [2022] 2 SLR 1018 | Singapore | Cited for the tests applicable to each limb of Order 9 Rule 16 of the Rules of Court 2021. |
| The “Bunga Melati 5” | High Court | Yes | [2012] 4 SLR 546 | Singapore | Cited for the definition of 'legally unsustainable' and 'factually unsustainable' claims. |
| Gabriel Peter & Partners (suing as a firm) v Wee Chong Jin and others | Court of Appeal | Yes | [1997] 3 SLR(R) 649 | Singapore | Cited for the principle that a weak case is not grounds for striking out. |
| Chandra Winata Lie v Citibank NA | Court of Appeal | Yes | [2015] 1 SLR 875 | Singapore | Cited for the requirement to plead all material facts in respect of every cause of action. |
| EA Apartments Pte Ltd v Tan Bek and others | High Court | Yes | [2017] 3 SLR 559 | Singapore | Cited for the requirement to plead all material facts in respect of every cause of action. |
| Rothstar Group Ltd v Leow Quek Shiong and other appeals | Court of Appeal | Yes | [2022] 2 SLR 158 | Singapore | Cited for the focus on a comparison of value between the consideration provided by the grantor and the consideration received from the grantee. |
| Vesltra Pte Ltd v Dexia Bank NV | Court of Appeal | Yes | [2005] 1 SLR(R) 154 | Singapore | Cited for the principle that extension of credit constitutes valid consideration. |
| Kon Yin Tong and another v Leow Boon Cher and others | High Court | Yes | [2011] SGHC 228 | Singapore | Cited for the principle that the legal burden falls on the claimants to prove that the disposal of the Vessels was in fact an undervalue transaction. |
| 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 principle that an essential element of the cause of action which the claimants seek to pursue against the Defendants is that Xiang Da had been insolvent. |
| Parakou Shipping Pte Ltd (in liquidation) v Liu Cheng Chan and others | High Court | Yes | [2017] SGHC 15 | Singapore | Cited for the principle that the solvency of a company, in the context of an undervalue transaction, can be determined by the cash flow test or the balance sheet test, or both, depending on the circumstances of the case. |
| Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and others | High Court | Yes | [2004] 1 SLR(R) 434 | Singapore | Cited for the principle that the court adopts a commercial and not technical approach in determining balance sheet insolvency. |
| Seah Chee Wan and another v Connectus Group Pte Ltd | High Court | Yes | [2019] SGHC 228 | Singapore | Cited for the principle that if CSC Oil had no intention to demand repayment under the intercompany loans, then these debts are to be ignored in determining Xiang Da’s cash flow insolvency. |
| OP3 International Pte Ltd (in liquidation) v Foo Kian Beng | High Court | Yes | [2022] SGHC 225 | Singapore | Cited for the principle that the court should not employ hindsight in considering the question of contingent liability. |
| V Nithia (co-administratrix of the estate of Ponnusamy Sivapakiam, deceased) v Buthmanaban s/o Vaithilingam and another | Court of Appeal | Yes | [2015] 5 SLR 1422 | Singapore | Cited for the principle that pleadings are central in delineating the parameters of a dispute. |
| SW Trustees Pte Ltd (in compulsory liquidation) and another v Teodros Ashenafi Tesemma and others | High Court | Yes | [2023] SGHC 160 | Singapore | Cited for the two-stage test applies in considering whether SFC should be ordered. |
13. Applicable Rules
| Rule Name |
|---|
| Rules of Court 2021 |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Bankruptcy Act | Singapore |
| Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Transaction at an undervalue
- Net book value
- Creditors’ voluntary liquidation
- Intercompany loans
- Reorganisation Proposal
- Running accounts
- Insolvency
- Material facts
- Consideration
- Cash flow test
- Balance sheet test
15.2 Keywords
- Striking out
- Transactions at an undervalue
- Insolvency
- Liquidation
- Civil Procedure
- Singapore
- High Court
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Undervalue Transaction | 95 |
| Avoidance of transfer | 90 |
| Insolvency Law | 85 |
| Civil Procedure | 70 |
| Company Law | 60 |
| Fiduciary Duties | 50 |
16. Subjects
- Civil Procedure
- Insolvency Law