Amrae Benchuan Trading v Lek Benedict: Directors' Duties & Unfair Preference
In Amrae Benchuan Trading Pte Ltd (in liquidation) v Lek Benedict and Others, the High Court of Singapore heard a claim by the company's liquidator against former directors Lek Benedict and Lim Wee Chuan, and Axum Marketing Pte Ltd, alleging breach of fiduciary duties and unfair preference under the Bankruptcy Act. The liquidator argued the directors improperly transferred company assets to Axum and paid themselves directors' fees while the company was insolvent. The court found the directors gave undue preference to Axum and the second defendant unduly preferred himself, awarding judgment to the plaintiff but ordering a set-off against costs owed to the defendants from a prior related suit.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Judgment for the plaintiff in the sum of $419,435.93 against the defendants and judgment against the second defendant in the sum of $115,000, with costs.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Liquidator claims directors breached duties by transferring assets to another company and paying fees when insolvent. Judgment for plaintiff, but set-off ordered.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Amrae Benchuan Trading Pte Ltd (in liquidation) | Plaintiff | Corporation | Judgment for Plaintiff | Won | |
| Lek Benedict | Defendant | Individual | Judgment against Defendant | Lost | |
| Lim Wee Chuan | Defendant | Individual | Judgment against Defendant | Lost | |
| Axum Marketing Pte Ltd | Defendant | Corporation | Judgment against Defendant | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Lai Siu Chiu | Judge | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Vijay Kumar | Vijay & Co |
4. Facts
- The company was wound up by court order on 19 September 2003.
- The first and second defendants were shareholders and directors of the company and Axum Marketing Pte Ltd.
- The company transferred crystal stock worth $1,268,983.02 to Axum on credit terms.
- The defendants withdrew funds from the company to repay themselves loans and directors’ fees.
- Niklex Supply Company obtained judgment against the company for $1,010,289.54.
- The company was insolvent from at least 31 March 2001.
- David Chan, Niklex's manager, underwrote the cost of the litigation.
5. Formal Citations
- Amrae Benchuan Trading Pte Ltd (in liquidation) v Lek Benedict and Others, Suit 424/2005, [2006] SGHC 75
6. Timeline
| Date | Event |
|---|---|
| Amrae Benchuan Trading Pte Ltd incorporated | |
| Concept Gifts business registered | |
| Amrae Benchuan Sdn Bhd (Malaysian company) incorporated | |
| Memco Pte Ltd (later Axum Marketing Pte Ltd) incorporated | |
| Amrae Benchuan Trading Pte Ltd started supplying goods to Axum Marketing Pte Ltd | |
| Tang Yoke Kheng sued Amrae Benchuan Trading Pte Ltd | |
| Concept Gifts Pte Ltd incorporated | |
| Niklex obtained judgment against Amrae Benchuan Trading Pte Ltd | |
| Consent judgment against Amrae Benchuan Trading Pte Ltd | |
| Amrae Benchuan Trading Pte Ltd wound up | |
| Don Ho Mun-Tuke replaced the Official Receiver as the liquidator | |
| Judgment reserved |
7. Legal Issues
- Breach of Fiduciary Duty
- Outcome: The court found that the defendants breached their fiduciary duties by giving undue preference to Axum and the second defendant unduly preferred himself.
- Category: Substantive
- Sub-Issues:
- Conflict of interest
- Failure to act bona fide in the best interests of the company
- Improper use of company assets
- Unfair Preference
- Outcome: The court found that the defendants gave undue preference to Axum in relation to the sum of $419,435.93 and that the second defendant unduly preferred himself in relation to the sum of $115,000.
- Category: Substantive
8. Remedies Sought
- Recovery of funds transferred from the company to the defendants and Axum
9. Cause of Actions
- Breach of Fiduciary Duty
- Unfair Preference
10. Practice Areas
- Commercial Litigation
- Insolvency Litigation
11. Industries
- Retail
- Import/Export
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Tang Yoke Kheng v Lek Benedict | High Court | Yes | [2004] 4 SLR 788 | Singapore | Cited for the dismissal of Tang's action based on s 340 of the Companies Act regarding the transfer of crystal ware from the Company to Axum. |
| Tang Yoke Kheng v Lek Benedict | Court of Appeal | Yes | [2005] 3 SLR 263 | Singapore | Cited for the dismissal of Tang's appeal against the dismissal of the third suit and the notice of motion for a stay of execution. |
| Tang Yoke Kheng v Lek Benedict | High Court | Yes | [2004] 3 SLR 12 | Singapore | Cited for setting aside the ex parte injunctions and mandatory orders obtained by Tang against the defendants and Gregory. |
| Re Tang Yoke Kheng | High Court | Yes | [2006] 1 SLR 351 | Singapore | Cited for the dismissal of the appeals against the assistant registrar’s decision regarding the stay orders on the judgment in the third suit. |
| Browne v Dunn | House of Lords | Yes | (1894) 6 R 67 (HL) | United Kingdom | Cited for the principle that allegations made against a witness that are not challenged in cross-examination stand as evidence. |
| Re MC Bacon Ltd (No 1) | N/A | Yes | [1990] BCLC 324 | United Kingdom | Cited for the principle that a transaction will not be set aside as a voidable preference unless the company positively wished to improve the creditor’s position in the event of its own insolvent liquidation. |
| Re Libra Industries Pte Ltd | High Court | Yes | [2000] 1 SLR 84 | Singapore | Cited for adopting the dicta in Re MC Bacon Ltd (No 1) regarding voidable preference. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Bankruptcy Act (Cap 20, 2000 Rev Ed) | Singapore |
| Companies Act (Cap 50, 1994 Rev Ed) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Unfair preference
- Fiduciary duty
- Insolvency
- Directors' fees
- Liquidation
- Crystal ware
- Niklex
- Axum
- David Chan
- Running account
15.2 Keywords
- Insolvency
- Directors' duties
- Unfair preference
- Liquidation
- Singapore
- Company law
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Insolvency Law | 90 |
| Winding Up | 90 |
| Avoidance of transfer | 80 |
| Fiduciary Duties | 70 |
| Director's Duties | 70 |
| Company Law | 60 |
16. Subjects
- Insolvency
- Corporate Governance
- Directors' Duties