Case Update

COMPANIES & CORPORATIONS

Re PCChip Computer Manufacturer (S) Pte Ltd (in compulsory liquidation)
[2001] 3 SLR 296

High Court - Originating Summons No 1736 of 2000
Lee Seiu Kin JC
18 April, 13 June 2001

Liquidation - Unjust enrichment - Bank's mistaken over-crediting of moneys into company's account after winding-up order made - Whether bank entitled to return of moneys or whether bank rank as unsecured creditors - Whether liquidators as officers of court should be compelled to return moneys paid under mistake of fact - Applicability of principle in Ex p James - Companies Act (Cap 50, 1994 Ed) s 273(3)

Thio Ying Ying and Cheong Aik Hock (Kelvin Chia Partnership) for the plaintiffs.
Chew Kei Jin (Tan Rajah & Cheah) for the defendants.

This is an application by the plaintiffs, as liquidators of PCChip Computer Manufacturer (S) Pte Ltd ('the company'), for directions of the court pursuant to s 273(3) of the Companies Act (Cap 50, 1994 Ed). The company was wound up pursuant to an order of court dated 16 October 1998 and the plaintiffs were appointed as liquidators. At the time of winding up, the company had several bank accounts in its name in which one ('the OCBC account') was opened with the defendants ('the bank'). On or about 31 May 1999, the bank notified the company that the OCBC account had been mistakenly over-credited on 24 June 1998 in the sums of US$85,200 and US$590. The bank explained that on 19 June 1998, the company had paid in two cheques in those sums for credit into the OCBC account. These sums were credited into that account by the bank's computer system on 22 June 1998. However, on 24 June 1998, the computer system again credited those amounts into the OCBC account, thereby resulting in the account being credited twice for those two cheques. This money was mixed with other funds of the company which totalled about S$747,521 at the time. Thereafter, there were various withdrawals. Upon their appointment, the liquidators wrote to the bank on 16 October 1998 and 26 October 1998 to instruct them to close all the company's accounts with them and to forward, inter alia, all proceeds in the respective currencies by cashier's orders made payable to the company. Accordingly, on 27 November 1998, the bank transferred the total amount of US$257,005.63 out of the OCBC account by way of a banker's draft. This sum of US$257,005.63 was paid into the company's US Dollar Account with United Overseas Bank Ltd which, upon such payment, stood at US$258,128.68. The plaintiffs did not deny that a sum of US$85,790 was mistakenly paid by the bank. The problem here was that the company was insolvent and the issue was whether the bank was entitled to the return of the money in full or were simply unsecured creditors.

Held, directing the liquidators to pay the bank the sum of US$85,790 being the amount that had been paid over by mistake:
The principle in Ex p James is a statement of general policy that has not been reduced to any rigid rule of law. Therefore the four conditions distilled by Walton J in Re Clark are but a guide to the application of the principle. Applying the first condition, viz enrichment of the estate, it would be immediately obvious to see that this was satisfied in the present case.

The second condition is that the claimant be not in a position to submit an ordinary proof of debt. Among others, the court noted that the bank would not have a debt provable in the winding up. As the over-crediting took place after the winding up, there is no provision in the Bankruptcy Act (Cap 20,
2000 Ed) permitting proof of debt or liability incurred after the order is made.

The court also found that the third condition, ie that a fair-minded person would consider it only fair to return the money to the claimant, was satisfied in this case. There was no prejudice whatsoever suffered by the estate or the creditors as a consequence of this mistake on the part of the bank. To permit the liquidators to keep the money would mean that the creditors would enjoy a windfall at the expense of the bank. It would not accord with any honest person's sense of decency and fair play.

The fourth condition is that the principle should only apply to the extent necessary to nullify the enrichment of the estate. Since the subject matter involved cash, there was no difficulty in this regard.

Quite apart from the four conditions in Re Clark, the present case is on all squares with the facts in Ex p James. Here, as there, the bank had made a payment under mistake to the liquidators who were officers of the court. Although the mistake here was a mistake of fact whereas that in Ex p James was one of law, there is now no distinction between these two categories of mistake. The liquidators had suffered no prejudice but would gain a windfall if the court did not act. This would clearly be a case in which the court would apply the principle in Ex p James and direct the liquidators to return the money to the bank. Accordingly, the liquidators were directed to pay the bank the sum of US$85,790 being the amount that had been paid over by mistake.