Living the Link Pte Ltd v Tan Lay Tin Tina  SGHC 67 (“Tina Tan”)
The extent of a director’s liability for procuring the payment amounting to an undue preference under Singapore law (see s.329 of the Companies Act read with ss.100 to 103 of the Bankruptcy Act)) was considered for the first time in an unreported decision of the Singapore High Court in Living the Link Pte Ltd v Tan Lay Tin Tina  SGHC 67 (“Tina Tan”), a decision delivered by Justice Steven Chong.
Whilst the law relating to the situations in which a court will set aside a payment to a creditor as being an undue preference is settled (see the Court of Appeal’s decision in Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd  4 SLR 1089), the decision in Tina Tan is notable because it considers the issue and extent of a director’s liability for procuring the payment of the undue preference.
By way of background, it is accepted that directors of an insolvent company (or a company in a parlous financial position) owe a duty to act in the company’s creditors collective best interests when making decisions for the company. This duty is fiduciary in nature and owed to the company. However, it has never been clear (under Singapore law at least) what the consequence of a breach of this duty would be, insofar as the procuring the payment of an undue preference is concerned.
The Court answered this question by holding that a director who procures a payment amounting to an undue preference to a creditor will generally:-
- be found to have breached his/her fiduciary duties to the company; and
- be jointly and severally liable with the creditor to whom the unfair preference payment was made to restore the company to the position it would otherwise be in had the unfair preference not been given.
On the facts of this case, the director (Tina Tan) was held to be jointly and severally liable with the company’s associated entities to repay certain monies (which were found to be undue preferences) to the company. At the date of writing, it is unclear if the decision is subject to appeal.
The decision may be useful in the event there is a need to advise company directors on their obligations where their businesses are not doing well and, in particular, the extent of the director’s potential liability should any payments to creditors procured by them be subsequently set aside as undue preferences.
25 April 2016
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