GOH ECK HONG v TAN BOON KIAN

"Therefore, applying the cash flow test, I find that the Bankrupt was insolvent at the time of the Transfers in November 2016 and January 2017." — Per Tan Siong Thye J, Para 31

Case Information

• Citation: [2021] SGHC 62 (Para 0)
• Court: General Division of the High Court of the Republic of Singapore (Para 0)
• Date: Hearing on 11 February 2021; judgment reserved on 30 March 2021 (Para 0)
• Coram: Tan Siong Thye J (Para 0)
• Case Number: Bankruptcy No 533 of 2018 (Summons No 5249 of 2020) (Para 0)
• Area of Law: Insolvency law; avoidance of transactions at an undervalue and unfair preferences (Para 0)
• Counsel for the Private Trustee in Bankruptcy: Not answerable from the extraction (Para 0)
• Counsel for TPS, TBH, and FT: Not answerable from the extraction (Para 0)
• Judgment Length: Not answerable from the extraction (Para 0)

What Was the Private Trustee Asking the Court to Do?

The application was brought by the private trustee in bankruptcy to unwind transfers made by the bankrupt to his siblings and daughter shortly before bankruptcy. The trustee sought declarations that the transfers were void under the Bankruptcy Act because the payments to the siblings were unfair preferences and the payments to the daughter were transactions at an undervalue. The court described the application in direct terms and identified the statutory basis for the relief sought. (Para 3)

"The Private Trustee commenced this application (“SUM 5249/2020”) for declarations that the Transfers are void under ss 98 and/or 99 of the Bankruptcy Act (Cap 20, 2009 Rev Ed) (the “Act”) as the transactions entered into with FT were undervalued and the payments to TPS and TBH were unfair preferences." — Per Tan Siong Thye J, Para 3

The trustee’s case was that the bankrupt had transferred substantial sums to close family members within the relevant look-back period, at a time when he was already insolvent or on the brink of insolvency. The court therefore had to decide whether the statutory conditions for avoidance were met, and if so, whether any discretionary reason existed not to restore the position. (Para 3)

The judgment also makes clear that the statutory provisions in the Bankruptcy Act were the operative law for the application, even though the court noted that the equivalent provisions now appear in the Insolvency, Restructuring and Dissolution Act 2018. That observation mattered because the court treated the older and newer regimes as materially the same for present purposes. (Para 9)

What Were the Transfers and Why Did They Matter?

The material transfers were straightforward in form but significant in amount. The bankrupt was declared bankrupt on 19 April 2018 after a bankruptcy application filed on 7 March 2018, and the court focused on transfers made within the two years before that application. Those transfers were the factual foundation for the avoidance claims. (Para 1)

"On 7 March 2018, a bankruptcy application was filed against him. Subsequently, on 19 April 2018, he was declared bankrupt." — Per Tan Siong Thye J, Para 1

"On 18 January 2017, the Bankrupt transferred S$250,000 to his sister, TPS." — Per Tan Siong Thye J, Para 2(a)

"On 18 January 2017, the Bankrupt transferred S$150,000 to his brother, TBH." — Per Tan Siong Thye J, Para 2(b)

"On 1 November 2016 and 25 January 2017, the Bankrupt transferred a total of S$100,000 to his daughter, FT." — Per Tan Siong Thye J, Para 2(c)

The court treated these as the “Transfers” for purposes of the application. The sibling transfers were analysed under the unfair preference provisions, while the daughter’s transfers were analysed as possible undervalue transactions because they were said to be gifts. (Para 2)

That distinction mattered because the statutory elements differ. For unfair preference, the trustee had to show a preference given at the relevant time and, in the case of an individual, a desire to prefer. For undervalue, the trustee had to show that the bankrupt entered into a transaction for no consideration or for consideration significantly less than the value provided. (Para 10, Para 15, Para 21)

How Did the Court Frame the Issues for Decision?

The court framed the dispute around four central issues, and that framing structured the entire judgment. The first issue was insolvency at the time of the Transfers. The second was whether the bankrupt was influenced by a desire to prefer TPS and TBH. The third was whether the transfers to FT were transactions at an undervalue. The fourth was whether, even if the FT transfers were undervalue transactions, the court should decline to make the restoration order. (Para 21)

"The central issues to be determined in this case are, therefore, as follows: (a) whether the Bankrupt was insolvent at the time of the Transfers; (b) whether the Bankrupt was influenced by a desire to prefer when he made the transfers to TPS and TBH; (c) whether the transfers to FT were transactions at an undervalue; and (d) if the transfers to FT were indeed transactions at an undervalue, whether I should nevertheless decline to make the order sought by the Private Trustee in the circumstances of her case." — Per Tan Siong Thye J, Para 21

This issue-framing is important because it shows the court’s methodical approach. The judge did not treat the case as a single broad inquiry into fairness. Instead, each transfer category was matched to the correct statutory test, and each test was then applied to the evidence. (Para 21)

The court also signposted the legal architecture early. It explained that the insolvency inquiry under s 100(4) was disjunctive, meaning that either the cash flow test or the balance sheet test could establish insolvency. That point became central because the trustee relied on both tests, and the court ultimately found both satisfied. (Para 23, Para 31, Para 64)

How Did the Court Approach Insolvency Under the Bankruptcy Act?

The court began by setting out the statutory framework for insolvency and the relevant avoidance provisions. It noted that the Bankruptcy Act provisions governing unfair preferences and transactions at an undervalue were now mirrored in the IRDA, but the case was decided under the Bankruptcy Act. The court then explained that insolvency under s 100(4) could be established by either the cash flow test or the balance sheet test. (Para 9, Para 10, Para 15, Para 23)

"It is well established that these two tests are to be read disjunctively, so that the Bankrupt will be held to be insolvent as long as one of the two tests is satisfied" — Per Tan Siong Thye J, Para 23

On the cash flow side, the court adopted the familiar formulation that insolvency is established when the debtor is pressed for payment at the material time and has not been able to pay. The judge also relied on authority and commentary indicating that technically due debts may be ignored if there is no current indication that creditors are requiring repayment, but that where there are unequivocal demands and no bona fide dispute, the evidence points strongly toward illiquidity. (Para 25)

"Cash flow insolvency will be established if the individual was “pressed for payments at the material time … and had not been able to pay”" — Per Tan Siong Thye J, Para 25

The court then applied that standard to the evidence of creditor demands. It found that the letters from HEP dated 25 August 2016 and 3 October 2016 contained unequivocal and repeated requests for payment, and those requests were not disputed by the bankrupt. That evidence supported the conclusion that the bankrupt was unable to meet his obligations as they fell due. (Para 28)

"However, HEP’s letters dated 25 August 2016 and 3 October 2016 contained unequivocal and repeated requests for the payment of their bills, which were not disputed by the Bankrupt." — Per Tan Siong Thye J, Para 28

On that basis, the court held that the bankrupt was cash flow insolvent at the time of the Transfers in November 2016 and January 2017. The judge’s conclusion was not merely inferential; it was tied to the creditor correspondence and the absence of any real dispute about the debts. (Para 28, Para 31)

The court also considered the balance sheet test. It examined the bankrupt’s liabilities and assets at the material time, including contingent liabilities, and concluded that the liabilities far exceeded the assets. The judge accepted that the liabilities were at least S$235.87 million, while the assets were approximately S$3.29 million. (Para 64)

"As the amount of the Bankrupt’s liabilities (at least S$235.87m) far exceeded the value of his assets (approximately S$3.29m) at the time of the Transfers, I find that the Bankrupt was also balance sheet insolvent at the material time." — Per Tan Siong Thye J, Para 64

The court’s insolvency analysis therefore rested on two independent foundations. Even if one were to question the cash flow evidence, the balance sheet evidence independently established insolvency. Conversely, even if one were to debate the valuation exercise, the creditor-demand evidence independently supported the cash flow conclusion. (Para 31, Para 64)

Why Did the Court Find the Sibling Transfers Were Unfair Preferences?

The sibling transfers to TPS and TBH were analysed under the unfair preference provisions. The court first had to determine whether the bankrupt was insolvent at the relevant time, because insolvency is a necessary predicate for the statutory presumption to operate. Having found insolvency, the court then turned to the question of desire to prefer. (Para 21, Para 31, Para 64)

"Where an individual is adjudged bankrupt and he has, at the relevant time (as defined in s 100 of the Act), given an unfair preference to any person (the “recipient”), the private trustee in bankruptcy may apply to the court to make such order as it thinks fit for restoring the position to what it would have been if that individual had not given that unfair preference (s 99(1) (read with s 36) and s 99(2) of the Act)." — Per Tan Siong Thye J, Para 10

The court explained that the trustee had to show the statutory elements, including the relevant time and the preference. For an individual bankrupt, the law also requires proof that the bankrupt was influenced by a desire to prefer the recipient. The court then considered whether that desire could be inferred from the circumstances and whether the respondents had rebutted the presumption. (Para 10, Para 69, Para 70, Para 72)

The judge held that the respondents TPS and TBH had not rebutted the presumption. The evidence showed that the bankrupt transferred money to them because they were the family members who had been most supportive of him during his difficulties. The court accepted that the bankrupt’s own affidavit evidence showed a subjective desire to improve their positions. (Para 69, Para 70)

"The Bankrupt’s direct evidence on affidavit shows that he was influenced by a subjective desire to improve TPS’s and TBH’s absolute positions at the time of the transfers." — Per Tan Siong Thye J, Para 70

The court also emphasised that the desire to prefer does not require knowledge of insolvency. What matters is the desire to produce the effect of preference. The judge relied on authority to explain that the requisite desire may be proved directly or inferred from circumstances, and that a debtor may prefer a creditor even if bankruptcy seems remote. (Para 70, Para 72)

"the desire to prefer relates to the producing of the effect of a preference and has nothing to do with knowledge of one’s own insolvency" — Per Tan Siong Thye J, Para 72

On the facts, the court found that the bankrupt’s transfers to TPS and TBH were motivated by gratitude and appreciation for their support. That was enough to establish the subjective desire to prefer. The court therefore concluded that TPS and TBH had failed to rebut the statutory presumption. (Para 69, Para 70, Para 72, Para 74)

"Therefore, TPS and TBH have failed to rebut the statutory presumption that the Bankrupt was influenced by a desire to prefer them in making the transfers." — Per Tan Siong Thye J, Para 74

How Did the Court Deal With the Transfers to the Daughter, FT?

The transfers to FT were treated differently because the trustee’s case was that they were gifts and therefore transactions at an undervalue. The court first had to determine whether the transfers fell within s 98, and then whether any reason existed to refuse relief even if the statutory elements were met. (Para 15, Para 21)

"Where an individual is adjudged bankrupt and he has, at the relevant time (as defined in s 100 of the Act), entered into a transaction with any person at an undervalue, the private trustee in bankruptcy may apply to the court to make such order as it thinks fit for restoring the position to what it would have been if that individual had not entered into that transaction (s 98(1) (read with s 36) and s 98(2) of the Act)." — Per Tan Siong Thye J, Para 15

The court accepted the trustee’s submission that the transfers to FT were gifts. Once that characterisation was accepted, the legal consequence followed naturally: a gift is a transfer for no consideration, and therefore an undervalue transaction under the statutory scheme. The judge stated the conclusion in direct terms. (Para 76, Para 78)

"I agree with the Private Trustee’s submission that the transfers to FT were gifts made by the Bankrupt to her" — Per Tan Siong Thye J, Para 76

"The transfers to FT were, therefore, undervalue transactions under s 98(3)(a) of the Act." — Per Tan Siong Thye J, Para 78

FT argued that her situation should be treated like the respondents in certain English cases because she had received and spent the money in good faith for the purpose for which it was given. The court rejected that analogy. It held that the facts before it were materially different, because the transfers were direct gifts and could simply be reversed by an order requiring FT to repay the same amount to the trustee. (Para 81, Para 85)

"FT argues that her situation is similar to that of the respondents in the English cases ... as she received and spent the S$100,000 in good faith for the exact purpose for which it was given to her." — Per Tan Siong Thye J, Para 81

The court’s reasoning was practical as well as doctrinal. It noted that the factors that had persuaded courts in the English cases not to make restoration orders did not apply here. The transfers were not embedded in a complex commercial arrangement; they were simple family gifts that could be undone by a straightforward repayment order. (Para 85, Para 86)

"These factors do not apply in the present case. The transfers amounting to S$100,000 were direct gifts from the Bankrupt to FT which can be simply reversed by an order that FT transfer a sum of S$100,000 to the Private Trustee." — Per Tan Siong Thye J, Para 85

What Evidence Did the Court Rely on to Find Insolvency and Preference?

The court’s factual analysis was grounded in documentary evidence and the bankrupt’s own evidence. On the cash flow issue, the HEP letters were important because they showed active and repeated demands for payment. The court treated those letters as strong evidence that the bankrupt was being pressed for payment and could not meet his obligations. (Para 25, Para 28)

"As proof of the debtor company’s state of illiquidity, it will suffice to exhibit to the court some evidence – conveniently, often, in the form of correspondence – showing an unequivocal request for payment made by the creditor, and an absence of any bona fide dispute as to indebtedness on the part of the debtor." — Per Tan Siong Thye J, Para 25

The court also considered the valuation evidence. It referred to three valuation reports and concluded that one of them, HVS’s valuation, did not accurately reflect the actual value of the Hotel at the time of the Transfers. That finding mattered because the balance sheet analysis depended on the value of the bankrupt’s assets, including the Hotel. (Para 37)

"Having considered the three valuation reports and the parties’ submissions, I am of the view that HVS’s valuation does not accurately reflect the actual value of the Hotel at the time of the Transfers in November 2016 and January 2017." — Per Tan Siong Thye J, Para 37

In addition, the court considered the bankrupt’s own affidavit evidence. That evidence was especially important on the preference issue because it revealed the bankrupt’s state of mind and his reasons for making the transfers to TPS and TBH. The judge treated that evidence as direct proof of a desire to improve their positions. (Para 70)

The court also dealt with contingent liabilities. It explained that a prospective liability is a debt certain to become due in the future, and it discussed how such liabilities should be valued for balance sheet purposes. The judge preferred an approach that included the full value of contingent debts where there was a real prospect that the contingency would occur. (Para 46, Para 58, Para 60)

"As explained in Kon Yin Tong and another v Leow Boon Cher and others [2011] SGHC 228 at [40], a prospective liability is a debt which will certainly become due in the future, either on some date which has already been determined or on some date determinable by reference to future events." — Per Tan Siong Thye J, Para 46

"the preferable approach (as Goode suggests) is to include the full value of contingent debts where there is a real prospect that the relevant contingency will occur." — Per Tan Siong Thye J, Para 60

That treatment of contingent liabilities was central to the balance sheet insolvency finding. The court did not simply count fixed debts; it assessed the likely future burden of liabilities and concluded that the bankrupt’s obligations overwhelmingly exceeded his assets. (Para 58, Para 60, Para 64)

How Did the Court Interpret the Desire to Prefer Requirement?

The desire to prefer requirement was a major issue because TPS and TBH argued that the transfers should not be avoided. The court explained that the burden lay on them to rebut the statutory presumption by showing, on a balance of probabilities, that the transfers were not influenced at all by a desire to place them in a preferential position. (Para 69)

"In order to rebut this presumption, TPS and TBH must show, on a balance of probabilities, that the transfers were not influenced at all by any desire on the Bankrupt’s part to place them in a preferential position (see Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd [2010] 4 SLR 1089 at [36])." — Per Tan Siong Thye J, Para 69

The court then explained that desire may be proved directly or inferred from circumstances. That principle was important because the bankrupt’s motive was not established by a formal admission alone; rather, it emerged from the surrounding facts and his own evidence. The judge found that the bankrupt wanted to show appreciation to the family members who had supported him. (Para 70)

"the requisite desire may be proved by direct evidence or its existence may be inferred from the existing circumstances of the case (see DBS Bank Ltd v Tam Chee Chong and another (judicial managers of Jurong Hi-Tech Industries Pte Ltd (under judicial management)) [2011] 4 SLR 948 (“Tam Chee Chong”) at [22] and [26])." — Per Tan Siong Thye J, Para 70

The court also rejected any suggestion that the bankrupt had to know he was insolvent before the desire to prefer could be established. It relied on authority stating that the desire to prefer concerns the effect of the transfer, not the debtor’s awareness of insolvency. That distinction allowed the court to focus on motive and effect rather than subjective legal awareness. (Para 72)

"“the desire to prefer relates to the producing of the effect of a preference and has nothing to do with knowledge of one’s own insolvency”." — Per Tan Siong Thye J, Para 72

Applying those principles, the court held that the sibling transfers were preferential because they improved the siblings’ positions relative to other creditors and were motivated by the bankrupt’s desire to favour them. The court therefore granted relief under the unfair preference provisions. (Para 74)

Why Did the Court Reject FT’s Request for Discretionary Relief?

Even after finding that the transfers to FT were undervalue transactions, the court still had to consider whether it should decline to make the restoration order. FT argued that she had received and spent the money in good faith for the purpose for which it was given, and that an order would be unjust. The court considered that submission but rejected it. (Para 81, Para 85)

The judge distinguished the English authorities relied on by FT. In those cases, the facts were exceptional and involved circumstances that made restoration inequitable or impractical. By contrast, the present case involved direct gifts from father to daughter, and the remedy was simply to reverse the transfer by repayment. (Para 83, Para 86)

"In Claridge, the bankrupt (Mr Claridge) and the respondent (Mrs Claridge) were husband and wife." — Per Tan Siong Thye J, Para 83

"I turn now to Re Fowlds. Several years before his bankruptcy, the bankrupt (Mr Fowlds) had retained his stepdaughter (Ms Wilson), a qualified management accountant, to provide forensic accountancy services on an arm’s length, commercial basis." — Per Tan Siong Thye J, Para 86

The court’s conclusion was that the equitable considerations in those cases did not apply. The transfers here were not part of a commercial relationship, nor were they embedded in a family arrangement with special features that would make restoration unfair. The judge therefore saw no reason to withhold relief. (Para 85, Para 86)

That conclusion is significant because it shows the court’s willingness to apply the statutory avoidance regime robustly even where the recipient is a family member who may have acted in good faith. Good faith receipt alone was not enough to defeat the trustee’s claim where the statutory elements were otherwise established. (Para 81, Para 85)

What Did the Court Say About the Relationship Between the Bankruptcy Act and the IRDA?

The court expressly noted that the statutory provisions governing transactions at an undervalue and unfair preferences are now contained in the IRDA, but it treated the Bankruptcy Act provisions as materially equivalent for the purposes of the case. That observation matters because it means the reasoning has continuing relevance under the modern insolvency framework. (Para 9)

"the statutory provisions governing transactions at an undervalue and unfair preferences are now contained in ss 361–365 of the Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018) (“IRDA”)." — Per Tan Siong Thye J, Para 9

The judge further stated that the issues would not have been resolved differently under the equivalent IRDA provisions. That makes the case useful not only as a Bankruptcy Act decision but also as a guide to the current statutory scheme. (Para 9)

"The statutory provisions under the Bankruptcy Act and the IRDA are substantially the same. Hence, the issues arising in this application would not have been resolved differently under the equivalent IRDA provisions." — Per Tan Siong Thye J, Para 9

For practitioners, that means the case is not merely of historical interest. Its treatment of insolvency tests, preference motive, undervalue gifts, and discretionary relief remains relevant to modern avoidance litigation. (Para 9, Para 23, Para 69, Para 78, Para 85)

Why Does This Case Matter?

This case matters because it is a clear and practical illustration of how Singapore courts analyse avoidance claims involving family transfers made shortly before bankruptcy. The court applied the statutory tests carefully, found insolvency on both the cash flow and balance sheet bases, and then used the evidence of motive and family support to uphold the unfair preference claims. (Para 31, Para 64, Para 74)

It also matters because the court gave a detailed treatment of contingent liabilities and valuation methodology. The discussion of how to value liabilities that may arise in the future is useful beyond the facts of this case, especially in insolvency disputes where asset and liability values are contested. The judge’s discussion of Goode’s competing approaches shows a preference for realism over mechanical or speculative valuation. (Para 58, Para 60)

"I agree with the view expressed in Goode that neither of the two approaches is fully satisfactory. The first approach seems overly mechanical, whereas the second approach would be highly speculative." — Per Tan Siong Thye J, Para 60

Finally, the case is important because it confirms that family generosity does not immunise a transfer from avoidance if the statutory elements are met. A gift to a child can be an undervalue transaction, and a payment to siblings can be an unfair preference if made with the requisite desire. The court’s refusal to exercise discretion in FT’s favour reinforces the point that the statutory scheme is designed to protect the estate for the benefit of creditors. (Para 76, Para 78, Para 85)

Cases Referred To

Legislation Referenced

• Bankruptcy Act (Cap 20, 2009 Rev Ed): ss 36, 98, 99, 100, 101 (Para 10, Para 15, Para 21)
• Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018): ss 361–365 (Para 9)

Source Documents

• Original Judgment — Singapore Courts
• Archived Copy (PDF) — Litt Law CDN
• View in judgment: "On 18 January 2017, the Bankrupt..."
• View in judgment: "On 18 January 2017, the Bankrupt..."

This article analyses [2021] SGHC 62 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.