Apex court criticises Nicky Tan, lawyers from Rajah & Tann and Tan Kok Quan

EXPERIENCED liquidator Nicky Tan and litigators from reputable law firms Rajah & Tann Singapore and Tan Kok Quan Partnership have drawn a sharp rebuke from the apex court for misleading the five judges.

The court, in written grounds of decision released Thursday, chastised Mr Tan and his two colleagues in their capacity as court-appointed liquidators of Sembawang Engineers and Constructors (SEC), as well as their counsel from Tan Kok Quan, and lawyers from Rajah & Tann for proceeding with an appeal despite the parties having reached a settlement and not being forthcoming about it.

The liquidators had wanted the Court of Appeal to determine what they deemed novel legal questions that had wide implications on insolvency proceedings. Thus, the court convened a sitting of five judges instead of the usual three-judge panel, given a departure from the existing legal position was sought.

As a result of the parties' settlement, the appeal had been rendered academic and had "totally wasted" the court's time for the hearing on Jan 20 as well as the preparatory work, wrote Justice of the Court of Appeal Judith Prakash in the decision she delivered on behalf of the apex court.

Also, the court learnt that the parties had agreed that Rajah & Tann's client would not file any submissions in the appeal to counter the liquidators' arguments.

While the counsel from the two firms apologised to the court, they were criticised for not acknowledging "how greatly they have failed in their duty to the court as officers of the court".

Justice Prakash stated: "It is shocking to us that none of the counsel who appeared, all of whom are from established and reputable law firms, seemed to appreciate the gravity of their breach of duties. The apologies that were proffered to the court appeared to be pro forma without any real acknowledgment of the default."

The Tan Kok Quan team was led by Paul Seah and Rajah & Tann's by Chandra Mohan Rethnam.

The court also had strong words for Mr Tan and the other two liquidators, Lim Siew Soo and Brendon Yeo, for attempting "to stage a walkover" in the appeal, as they used the settlement negotiations to "contrive" a situation in which the respondent did not file submissions.

"The court does not sit simply because a party wants a legal question answered. The liquidators must have known this, which is why they insisted on terms in the settlement agreement that ensured the true position was concealed. Their conduct was reprehensible," added Justice Prakash.

Also, the court reminded the liquidators that a liquidator's appointment is always subject to the discretion of the court, which may consider the nominated liquidator's past misconduct. "We deplore the conduct of all involved in the strongest possible terms," the highest court in the land said in the decision.

SEC went under after total debts and contingent claims of S$367 million exceeded assets of S$24.3 million. Its liquidators were confronted with the issue of whether to proceed with the suit SEC had started pre-liquidation against Metax Eco Solutions, with the latter also making a counterclaim. If SEC lost, costs would be awarded to Metax, exposing the liquidators to legal fees as SEC's assets could be insufficient to cover.

The liquidators, instead, clarified with the High Court, which ruled that Metax's entire costs and not only those incurred after SEC became insolvent would have priority over the liquidation's other general expenses, including the liquidators' remuneration. They appealed against the High Court's decision while negotiating a settlement with Metax.

Tan Kok Quan lawyers agreed to act pro bono as SEC creditors declined to fund the appeal. Besides not charging their work in the appeal, the liquidators personally paid for the appeal's expenses as well.

But after Metax agreed to a settlement, the liquidators went ahead with the appeal instead of aborting it.