Royal Bank of Scotland v TT International: Duty to Disclose Value-Added Fee in Scheme of Arrangement

In The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal, the Singapore Court of Appeal addressed the issue of non-disclosure of a Value-Added Fee (VAF) arrangement in a scheme of arrangement. The court held that TT International had a duty to disclose the VAF to creditors and the Court prior to the sanctioning of the scheme. The Court directed the parties to reach an agreement on the appropriate amount of professional fees for the scheme manager; otherwise, the fees will be assessed by a High Court Judge.

1. Case Overview

1.1 Court

Court of Appeal

1.2 Outcome

The Court directed the parties to reach an agreement on the appropriate amount of professional fees for the scheme manager; otherwise, the fees will be assessed by a High Court Judge.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The Court of Appeal held that TT International had a duty to disclose a Value-Added Fee (VAF) arrangement with the scheme manager to creditors before the scheme of arrangement was sanctioned.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
TT International LtdRespondentCorporationOrder to negotiate feesNeutral
The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and othersAppellantCorporationAppeal Allowed in PartPartial

3. Judges

Judge NameTitleDelivered Judgment
Chan Sek KeongChief JusticeYes
Andrew Phang Boon LeongJustice of the Court of AppealYes
V K RajahJustice of the Court of AppealYes

4. Counsels

Counsel NameOrganization
Chan Hock KengWongPartnership LLP
Alvin YeoWongPartnership LLP
Lawrence FooWongPartnership LLP
Lee Eng BengRajah & Tann LLP
Raelene PereiraRajah & Tann LLP
Low Poh LingRajah & Tann LLP

4. Facts

  1. The Company's scheme of arrangement was sanctioned on 13 October 2010.
  2. A Value-Added Fee (VAF) arrangement existed between the Company and nTan Corporate Advisory Pte Ltd.
  3. nTan is owned by the scheme manager, Mr. Nicky Tan Ng Kuang.
  4. The VAF was contingent on the successful completion of the Scheme.
  5. The VAF was not disclosed to the creditors or the Court prior to the sanctioning of the Scheme.
  6. The Monitoring Committee became aware of the VAF approximately one year after the Scheme was sanctioned.
  7. The estimated quantum of the VAF was between $15m and $30m.

5. Formal Citations

  1. The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal, Civil Appeal Nos 44 of 2010 and 47 of 2010, [2012] SGCA 53
  2. TT International Ltd, , [2010] SGHC 177
  3. The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal, , [2012] 2 SLR 213

6. Timeline

DateEvent
Appointment Letter between the Company and nTan Corporate Advisory Pte Ltd
Appointment Letter between the Company and nTan Corporate Advisory Pte Ltd
Scheme meetings
Scheme meetings
Hearing before the Court of Appeal
Scheme sanctioned by the Court of Appeal
Company's financial results for the year ended
Company convened a meeting to update the scheme creditors on its financial results
Meeting where some information pertaining to the VAF was disclosed
Solicitors of the MC informed the Court of the existence of the Value-Added Fee
Detailed grounds of decision released
Decision Date

7. Legal Issues

  1. Duty to Disclose Material Information
    • Outcome: The Court held that the Company breached its duty to disclose the VAF to the scheme creditors and the Court.
    • Category: Substantive
    • Sub-Issues:
      • Non-disclosure of Value-Added Fee
      • Impact on creditors' decision-making
  2. Conflict of Interest
    • Outcome: The Court found that a conflict of interest had arisen because the quantum of the VAF which would accrue to nTan was dependent on the value of the debts which would be adjudicated upon by the proposed SM himself.
    • Category: Substantive
    • Sub-Issues:
      • Scheme manager's role and remuneration
      • Quasi-judicial duties of scheme manager

8. Remedies Sought

  1. Assessment of professional fees
  2. Setting aside the Scheme of Arrangement

9. Cause of Actions

  • Breach of Duty of Disclosure

10. Practice Areas

  • Commercial Litigation
  • Insolvency
  • Corporate Restructuring

11. Industries

  • No industries specified

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and others v TT International and another appealCourt of AppealYes[2012] SGCA 9SingaporeThe current judgment refers to the grounds of decision in this case, which explained why the appeals of the appellant creditors for the scheme of arrangement of the respondent company to be put to a re-vote on 27 August 2010 were allowed.
Wah Yuen Electrical Engineering Pte Ltd v Singapore Cables Manufacturers Pte LtdCourt of AppealYes[2003] 3 SLR(R) 629SingaporeCited for the principle that there is an independent principle of law to make full disclosure of material information in relation to the dealings of an insolvent company.
Re Heron International NV and othersUnited Kingdom CourtYes[1994] 1 BCLC 667United KingdomCited for the principle that a creditor ought to be given such up to date information explaining how the scheme will affect him commercially as can reasonably be provided by the company.
Re Pheon Pty LtdAustralian CourtYes(1986) 11 ACLR 142AustraliaCited for the principle that the company is obliged to make full and fair disclosure of all material facts known to them or reasonably accessible to them which it is relevant for the creditors to know.
Re Econ Corp Ltd (in provisional liquidation)High CourtYes[2004] 2 SLR(R) 264SingaporeCited for the principle that the law does not allow the directors of an insolvent company to commit the company to a substantial contingent financial commitment that will come from an unguarded pocket.
Daewoo Singapore Pte Ltd v CEL Tractors Pte LtdHigh CourtYes[2001] 2 SLR(R) 791SingaporeCited for the principle that the court will not sanction a scheme if the company and/or its majority creditors are not acting bona fide.
Fustar Chemicals Ltd (Hong Kong) v Liquidator of Fustar Chemicals Pte LtdHigh CourtYes[2009] 4 SLR(R) 458SingaporeCited for the proposition that a liquidator must never favour the interests of his appointers over that of the other legitimate claimants to the company's assets.
Pace and another v Antlers Pty Ltd (in liq)Federal Court of AustraliaYes[1998] 26 ACSR 490AustraliaCited for the principle that a liquidator occupies a fiduciary position in relation to the company, its creditors and contributories.
Re G K Pty Ltd (in liq); Ex parte Deputy Commissioner of TaxationAustralian CourtYes(1983) 7 ACLR 633AustraliaCited for the principle that a liquidator occupies a fiduciary position in relation to the company, its creditors and contributories.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Scheme of Arrangement
  • Value-Added Fee
  • Scheme Manager
  • Monitoring Committee
  • Disclosure
  • Material Information
  • Contingent Liability
  • Creditors
  • nTan Corporate Advisory Pte Ltd

15.2 Keywords

  • scheme of arrangement
  • value-added fee
  • disclosure
  • insolvency
  • creditors
  • scheme manager
  • TT International
  • Royal Bank of Scotland

17. Areas of Law

Area NameRelevance Score
Schemes of Arrangement90
Insolvency Law80
Duty of disclosure75
Company Law70
Professional Fees60
Bankruptcy60
Restructuring Expenses50
Winding Up40
Fiduciary Duties30
Commercial Disputes20
Contract Law10
Arbitration10
Breach of Contract10

16. Subjects

  • Schemes of Arrangement
  • Corporate Insolvency
  • Disclosure Requirements
  • Fiduciary Duties