RASHMI BOTHRA v SUNTECCITY THIRTY PTE LTD & 2 Ors

Facts

SuntecCity Thirty Pte Ltd (the Company) was a special purpose vehicle incorporated on 12 February 2016. Rashmi Bothra and Nimisha Pandey were its registered shareholders, holding 50% each. Rashmi's husband, Rajesh Bothra, had been adjudged a bankrupt on 25 February 2021, and Jason Aleksander Kardachi and Patrick Bance were the private trustees (PTs) of his estate. The property was sold for $38.75 million, and the shareholders could not agree how to divide the proceeds.

Rashmi filed HC/CWU 234/2022 and Nimisha filed HC/CWU 244/2022, each seeking to wind up the solvent Company on the just and equitable ground in s 125(1)(i) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). The PTs, who were not parties to either application, opposed Rashmi's nominees for liquidator and put forward their own. They alleged that Rajesh was the ultimate beneficial owner of Rashmi's shares, because his half of the purchase price came from Fareast Distribution and Logistics Pte Ltd, a company Rajesh had incorporated; Rashmi relied on declarations of trust which Nimisha and the PTs alleged were backdated. On 19 January 2023 the Judge dismissed CWU 244, made a winding up order on CWU 234, rejected Rashmi's nominees and appointed the PTs' nominees. Rashmi appealed in Civil Appeal No 6 of 2023, asking on appeal not for her own nominees but for liquidators of the court's choice.

Issues

1. Whether the private trustees of Rajesh's bankruptcy estate had standing to nominate liquidators in the winding up of the Company.
2. Whether the Judge was correct to reject Rashmi's nominees on the basis that the liquidators would need to investigate the beneficial ownership of her shares and the alleged backdating of the declarations of trust.
3. Whether the private trustees' other arguments justified leaving their nominees in office.

Holding

The Court of Appeal allowed the appeal on 4 August 2023 and set aside the appointment of the PTs' nominees as liquidators. On 22 August 2023 it appointed Tam Chee Chong, whom they had jointly nominated, as sole liquidator. The PTs were ordered to pay Rashmi costs of $40,000 (all-in) on a joint and several basis.

Reasoning

On standing, the court held that anyone entitled to apply for winding up under s 124(1) of the IRDA has the concomitant right to nominate a liquidator. A contributory under the IRDA must be a present or past member, meaning a person on the register of members. Rashmi was a member; Rajesh was not, even assuming he was the beneficial owner of her shares, so neither he nor the PTs could nominate. Section 152(4), read with s 123, did not help them: its representative contributories are the representatives of a member. The claim that Rajesh was a creditor through shareholder loans was new on appeal and had no evidence behind it.

On the rejection of Rashmi's nominees, the court disagreed with the Judge. A liquidator's statutory duty is to settle the list of members liable to contribute and distribute the assets; investigating who beneficially owned a registered member's shares was not part of that duty and was a dispute for separate proceedings between the PTs and Rashmi. The liquidators therefore did not need to examine the alleged backdating either. The Judge's reasoning would equally have disqualified the PTs' nominees, who stood on the other side of that question.

The court rejected the PTs' other points. Rashmi's request for court-chosen liquidators had been raised below. The Judge had erred in principle and in law, so appellate intervention was warranted. The PTs' status as officers of the court did not remove the perception of bias arising from their duty to maximise recovery for Rajesh's estate, and time already spent by the liquidators did not cure a wrong appointment. Treating Rajesh as owner through Fareast would also amount to impermissible insider reverse piercing.

From the judgment