SME CARE PTE LTD v Jannie Chan Siew Lee

Facts

Ms Jannie Chan Siew Lee was made bankrupt on 27 May 2019 in Bankruptcy No 2648 of 2018, and Mr Yit Chee Wah was later appointed private trustee of her estate. Three disputes over proofs of debt were heard together by Aidan Xu @ Aedit Abdullah J; Ms Chan acted in person.

SME Care Pte Ltd, a licensed moneylender, had lent money in 2012 to JASC Pte Ltd, Ms Chan's company, with her personal guarantee. After JASC defaulted, SME sued her on the guarantee. The parties settled, and on 7 May 2018 a consent judgment was entered for $2,150,000 plus interest. The trustee admitted $4,274,200 of SME's proof, rejecting the rest because interest should be simple, not compound. Ms Chan applied (SUM 4315) to set aside even that admission, saying the loan was extortionate and that she was pressured into the settlement.

Timor Global Pte Ltd (TGPL), of which Ms Chan was a director and sole shareholder until its winding up on 2 March 2018, filed a revised proof claiming S$18,413,260 and US$2,301,767. Its assignee, Fulcrum Distressed Partners Limited (FDPL), challenged the trustee's rejection of two parts: the TL Sum of S$15,766,459.98, recorded as receivables owed to TGPL by a Timor-Leste company (TL) in which Ms Chan held 70%; and the Finished Goods Sum of S$3,161,247.39 in coffee sale proceeds paid directly to TL in 2008. Ms Chan in turn challenged the admission of the Jannie Sum, receivables she was said to have taken over, and a S$1,276,800 payment to her recorded as a loan repayment.

Issues

1. Whether the court should go behind SME's consent judgment when reviewing its proof of debt
2. Whether claims for a director's breach of fiduciary duty are provable debts in bankruptcy
3. Whether Ms Chan breached her duties to TGPL over the TL Sum and Finished Goods Sum, and whether those claims were time-barred
4. Whether the trustee rightly admitted the Jannie Sum and the purported loan repayment

Holding

The court dismissed Ms Chan's applications in SUM 4315 and SUM 4316, leaving the trustee's admissions of SME's proof and of the Jannie Sum and loan repayment in place. It allowed FDPL's applications in SUM 4314 and OA 797, reversing the trustee's rejection and ordering that the TL Sum and the Finished Goods Sum be admitted.

Reasoning

On SME's proof, a consent judgment binds until set aside, and a trustee or court will go behind a judgment debt only where there is fraud, collusion or a miscarriage of justice. Nothing of that kind was shown. Ms Chan's fraud complaint had already failed before Choo Han Teck J for lack of particulars, and her account of signing in desperation without advice did not disclose fraud, undue influence or misrepresentation. The extortionate-credit provision did not apply to a guarantor, the court had already revised the interest rate in 2015, and compound interest had in fact been disallowed. She had been told repeatedly to apply to set the judgment aside.

On provability, following Re Medora Xerxes Jamshid, a claim for breach of fiduciary duty is provable as an unliquidated claim arising by breach of trust. On the TL Sum, the court rejected the trustee's view that the 2007 payments merely routed joint-venture funds to TL. They were recorded as receivables, Ms Chan had admitted on affidavit that the money was lent, and the transfers did not match the incoming payments. Applying the framework in Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] 1 SLR 361, TGPL was imminently likely to be unable to pay its debts in 2006 and 2007, and insolvency was inevitable from 2008. Paying TL for no benefit, never seeking repayment, and writing the receivables down in 2015 breached her duty to act bona fide in TGPL's interests. Because she could not have honestly believed this served TGPL, it was a fraudulent breach of trust under s 22(1)(a) of the Limitation Act, so no limitation period applied. For the Finished Goods Sum, the court inferred that she knew or should have known of the diversion, given her control of TGPL, her approval of its accounts and the size of the sum.

On Ms Chan's challenge, signed letters and journal entries showed she assumed third-party debts owed to TGPL. Her claim that those debts were owed to her came late and without evidence. No bank record supported the US$800,000 loan she said justified the repayment. Both claims fell within s 22(1)(a).

From the judgment