Case Details
- Citation: [2025] SGHC 6
- Court: General Division of the High Court of the Republic of Singapore
- Decision Date: 13 January 2025
- Coram: Kristy Tan JC
- Case Number: Originating Application No 1257 of 2024
- Hearing Date(s): 2 January 2025
- Claimants / Plaintiffs: Dasin Retail Trust Management Pte Ltd (in its capacity as trustee-manager of Dasin Retail Trust)
- Counsel for Claimants: Chew Xiang, Priscilla Soh and Alicia Tan (Rajah & Tann Singapore LLP)
- Practice Areas: Companies — Schemes of arrangement; Trustee-manager of business trust seeking moratorium for intended scheme of arrangement
Summary
In Re Dasin Retail Trust Management Pte Ltd [2025] SGHC 6, the General Division of the High Court addressed a novel and significant question regarding the intersection of trust law and the statutory insolvency framework: whether a trustee-manager of a registered business trust is entitled to seek a moratorium under Section 64 of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) to facilitate a scheme of arrangement for liabilities incurred in its representative capacity. The applicant, Dasin Retail Trust Management Pte Ltd (DRTM), acting as the trustee-manager of Dasin Retail Trust (DRT), sought a moratorium to restructure massive debts exceeding S$1 billion, primarily arising from syndicated loan facilities used to finance the acquisition of retail malls in the People’s Republic of China.
The application was vigorously opposed by Zhang Zhencheng (ZZC), a substantial shareholder and former director of DRTM, who argued that the IRDA does not recognize a "scheme of arrangement for a business trust" and that DRTM’s application constituted an abuse of process. The court was thus required to determine whether DRTM, as a corporate entity, fell within the definition of a "company" under Part 5 of the IRDA when the liabilities in question were incurred as trustee-manager, and whether the statutory scheme of arrangement mechanism could be applied to such trust-related debts. This required a deep dive into the legal nature of business trusts and the personal liability of trustees under Singapore law.
Kristy Tan JC held that DRTM is indeed a "company" for the purposes of Part 5 of the IRDA and is not precluded from applying for a moratorium under Section 64(1). The court clarified that because a trust is not a legal person, the liabilities incurred by a trustee-manager are, as a matter of law, the personal liabilities of the trustee-manager, even if it has a right of indemnity against the trust assets. Consequently, a scheme of arrangement proposed by the trustee-manager is a scheme between the company and its creditors, satisfying the statutory requirements. The judgment provides essential clarity for the restructuring of business trusts and Real Estate Investment Trusts (REITs) in Singapore, confirming that the corporate insolvency toolkit is available to trustee-managers and trustees facing insolvency.
Ultimately, the court granted the moratorium for an initial period of six months, subject to stringent disclosure requirements. The decision underscores the court's pragmatic approach to complex restructurings involving multi-layered corporate and trust structures, emphasizing that the focus remains on the legal entity (the trustee-manager) and its direct obligations to creditors, rather than the underlying trust relationship which lacks independent legal personality.
Timeline of Events
- 23 December 2016: Establishment of the IPO Facilities to finance the initial portfolio of Dasin Retail Trust.
- 16 January 2020: Execution of the Doumen Facilities and Shunde Facilities for further acquisitions.
- 31 December 2021: Significant financial reporting period where the trust's liquidity position began to face scrutiny.
- 10 January 2023: Commencement of formal disputes between major shareholders Zhang Zhencheng (ZZC) and Sino-Ocean Capital.
- 5 March 2023: Initial defaults or restructuring discussions began regarding the syndicated loan facilities.
- 5 March 2024: Further critical dates regarding the maturity and default status of the Offshore Facilities.
- 22 May 2024: Issuance of notices of default or demand by certain creditors.
- 21 August 2024: ZZC and related parties filed CWU 133, a winding-up application against DRTM.
- 6 September 2024: Procedural milestones in the ongoing shareholder litigation and winding-up proceedings.
- 12 November 2024: DRTM filed an application to stay the winding-up proceedings (CWU 133) in favor of arbitration.
- 19 November 2024: Further hearings regarding the stay of CWU 133.
- 26 November 2024: DRTM issued a notice to creditors regarding the intent to propose a scheme of arrangement.
- 2 December 2024: DRTM filed Originating Application No 1257 of 2024 (OA 1257) seeking a moratorium under Section 64 of the IRDA.
- 19 December 2024: Filing of further affidavits by ZZC opposing the moratorium application.
- 23 December 2024: Filing of the 3rd Affidavit of Wang Gan on behalf of DRTM.
- 2 January 2025: Substantive hearing of OA 1257 before Kristy Tan JC.
- 13 January 2025: Delivery of the judgment granting the moratorium.
What Were the Facts of This Case?
Dasin Retail Trust (DRT) is a business trust registered under the Business Trusts Act 2004 (BTA) and listed on the Mainboard of the Singapore Exchange Securities Trading Limited (SGX-ST). Its portfolio consists of retail malls located in the People's Republic of China. The applicant, Dasin Retail Trust Management Pte Ltd (DRTM), is the trustee-manager of DRT. In this capacity, DRTM is responsible for the management and operation of the trust's business and assets.
The financial distress of DRTM and DRT stemmed from three major syndicated loan facilities:
- The IPO Facilities: Originally totaling approximately S$410.5 million, used to finance the trust's initial assets.
- The Doumen Facilities: Totaling approximately S$103.2 million.
- The Shunde Facilities: Totaling approximately S$129.9 million.
As of 30 September 2024, the total outstanding amount under these "Offshore Facilities" was approximately S$475.9 million. Additionally, there were "Onshore Facilities" (loans taken by the PRC subsidiaries of DRT) totaling approximately S$389.5 million. DRTM also faced unsecured liabilities incurred as trustee-manager amounting to S$150.3 million, and personal unsecured liabilities (not related to the trust) of approximately S$4.4 million.
The restructuring efforts were complicated by a bitter internal dispute between DRTM's shareholders. Zhang Zhencheng (ZZC), who holds a 30% stake in DRTM, was at odds with Sino-Ocean Capital, which holds the remaining 70%. ZZC alleged that Sino-Ocean had failed to provide promised funding and was attempting to seize control of the trust's assets. Conversely, DRTM (controlled by the Sino-Ocean faction) alleged that ZZC had engaged in "self-help" measures, including the unauthorized removal of corporate seals and the replacement of directors in the PRC subsidiaries, effectively obstructing the trustee-manager's control over the malls.
In August 2024, ZZC filed a winding-up application (CWU 133) against DRTM, alleging that the company was insolvent and that it was just and equitable to wind it up due to the shareholder deadlock. DRTM responded by applying for a stay of CWU 133 in favor of arbitration, pursuant to Section 6 of the International Arbitration Act 1994. While that stay application was pending, DRTM filed OA 1257 on 2 December 2024, seeking a moratorium to facilitate a scheme of arrangement. The proposed scheme aimed to restructure the Offshore Facilities by extending their maturity dates and potentially converting some debt into equity or units in DRT.
Crucially, the "Offshore Lenders" (the banks holding the bulk of the debt) were divided. Lenders representing 53.06% of the debt supported the moratorium, while others remained neutral or opposed it. ZZC argued that the application was a "tactical maneuver" to stall the winding-up proceedings and that a trustee-manager could not legally use the scheme of arrangement mechanism for trust debts.
What Were the Key Legal Issues?
The court identified several critical issues that required resolution to determine the validity of the moratorium application:
- Threshold Standing: Whether DRTM, in its capacity as trustee-manager, qualified as a "company" under Part 5 of the Insolvency, Restructuring and Dissolution Act 2018, and whether it could bring an application under Section 64 in respect of liabilities incurred for the trust.
- The Nature of Trust Liabilities: Whether the liabilities incurred by DRTM as trustee-manager were legally the liabilities of DRTM itself, given that a business trust is not a separate legal entity.
- Abuse of Process: Whether the application was an abuse of process because the IRDA and the Companies Act 1967 do not explicitly provide for "schemes of arrangement for business trusts."
- Statutory Requirements: Whether DRTM had satisfied the procedural requirements of Section 64(4) of the IRDA, including the provision of adequate financial information and evidence of creditor support.
- Substantive Merits: Whether the proposed scheme was feasible and whether the application was made bona fide, especially in light of the ongoing shareholder dispute and the pending winding-up application.
How Did the Court Analyse the Issues?
The court’s analysis began with the fundamental question of whether DRTM had the standing to apply for a moratorium under Section 64 of the IRDA. Kristy Tan JC first addressed the definition of a "company" in the context of the IRDA. While Section 2(1) of the IRDA provides a general definition of "company," Part 5 (which contains Section 64) uses a broader definition. The court noted that DRTM is a company incorporated in Singapore and is not an "excluded company" under the Insolvency, Restructuring and Dissolution (Prescribed Companies and Entities) Order 2020. Specifically, the court found that while certain financial institutions are excluded, a trustee-manager of a business trust is not among the excluded categories. At [46], the court concluded:
"I am satisfied that DRTM falls within the definition of a “company” in Part 5 of the IRDA and is not precluded from making an application under s 64(1) of the IRDA."
The court then tackled the conceptual hurdle raised by ZZC: that the liabilities were "trust liabilities" and thus not amenable to a corporate scheme of arrangement. The court relied on the established principle that a trust is not a legal person but a relationship. Citing Lian Chee Kek Buddhist Temple v Ong Ai Moi and others [2024] 5 SLR 1213, the court emphasized that a trust cannot own property or incur debts in its own name. Instead, the trustee (or trustee-manager) enters into contracts and incurs liabilities personally, albeit with a right of indemnity against the trust assets. The court also referenced E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2013] 4 SLR 123 and the UK Supreme Court decision in Equity Trust (Jersey) Ltd v Halabi [2023] AC 877 to reinforce that "trust creditors" are technically creditors of the trustee.
Consequently, the court rejected the argument that a scheme of arrangement for trust-related debts was a legal impossibility. Since the debts were DRTM’s legal obligations, DRTM could propose a scheme to its creditors to compromise those obligations. The court noted that while the BTA provides for the winding up of a business trust, it does not provide a restructuring mechanism. In the absence of a specific BTA mechanism, the general corporate insolvency framework in the IRDA must apply to the corporate trustee-manager.
Regarding the "abuse of process" argument, ZZC had relied on Re Tantleff, Alan [2023] 3 SLR 250 to argue that the IRDA does not permit schemes for business trusts. The court distinguished Tantleff, noting it dealt with the UNCITRAL Model Law on Cross-Border Insolvency and specific exclusions therein, which did not apply to the domestic scheme of arrangement provisions under Section 64. The court held that applying for a moratorium to save a business trust’s assets from a "free-fall" liquidation was a legitimate use of the IRDA.
On the substantive requirements, the court applied the "broad assessment" test from Re IM Skaugen SE and other matters [2019] 3 SLR 979. This involves checking if the application is bona fide and if the proposed scheme has a reasonable prospect of success. The court found that despite the shareholder dispute, DRTM had a functioning board and management that were actively engaging with creditors. The fact that 53.06% of the Offshore Lenders supported the moratorium was a "significant factor" (at [58]).
The court also addressed the "feasibility" of the scheme. ZZC argued that the scheme was a "bare skeleton" and lacked detail. However, the court noted that at the moratorium stage, the applicant only needs to show that the scheme is "merited" and not "plainly doomed to failure." Citing Re Picotin Pte Ltd and other matters [2024] SGHC 156, the court observed that the standard is lower at the initial stage. The court was satisfied that the proposed extension of the Offshore Facilities and the potential unit issuance provided a sufficient basis for further negotiation.
Finally, the court considered the impact of the ZZC dispute on the trustee-manager's ability to implement a scheme. While acknowledging the "unfortunate" deadlock, the court held that the moratorium would provide the necessary "breathing space" to resolve these issues or reach a compromise with creditors that might bypass the shareholder impasse. The court emphasized that the moratorium protects the interests of the creditors as a whole, rather than any specific shareholder faction.
What Was the Outcome?
The court granted the moratorium application, providing DRTM with the protection needed to pursue the scheme of arrangement. The operative orders were as follows:
"I make an order in terms of Prayers 1 and 3 and make no order on Prayer 2 of OA 1257. I also make the additional disclosure orders set out at [70] above." (at [72])
The specific orders included:
- Moratorium Duration: A period of six months from the date of the order (until 13 July 2025), or until further order.
- Scope of Protection: No resolution for the winding up of DRTM shall be passed; no proceedings shall be commenced or continued against DRTM (including CWU 133); no execution or other legal process shall be commenced or continued; and no enforcement of security over DRTM’s property.
- Territorial Scope: The moratorium applies to any person in Singapore, or any person within the jurisdiction of the court.
- Disclosure Requirements: To address the creditors' concerns regarding the ZZC dispute and the PRC subsidiaries, the court ordered DRTM to provide:
- Monthly updates on the progress of the scheme and the status of the PRC subsidiaries.
- Quarterly management accounts of DRTM and DRT.
- Immediate notification of any material changes in the management or control of the PRC subsidiaries.
The court declined to grant Prayer 2, which sought to restrain the "commencement" of proceedings, as the existing proceedings (CWU 133) were already covered by the stay on "continuation." The court also noted that the moratorium could be extended or discharged upon application by any dissatisfied creditor, providing a safeguard against any future lack of progress.
Why Does This Case Matter?
Re Dasin Retail Trust Management Pte Ltd is a landmark decision for the Singapore restructuring landscape, particularly for the Business Trust and REIT sectors. Its significance can be categorized into three main areas: doctrinal clarity, statutory interpretation, and practical application.
1. Doctrinal Clarity on Trust Insolvency
The judgment reinforces the orthodox view that a trust is not a legal entity. While this is a basic tenet of trust law, its application in the context of modern statutory insolvency regimes like the IRDA was previously untested in this specific manner. By confirming that a trustee-manager is personally liable for trust debts and can therefore compromise those debts via a corporate scheme of arrangement, the court has bridged a potential "gap" in the law. Without this ruling, business trusts might have been left in a legal limbo where they could be wound up under the BTA but could not be restructured under the IRDA.
2. Statutory Interpretation of "Company" in the IRDA
The court’s detailed analysis of the definition of "company" under Part 5 of the IRDA provides a roadmap for other non-traditional corporate entities. By examining the Prescribed Companies and Entities Order, the court demonstrated that the IRDA is intended to be inclusive. Unless an entity is specifically excluded (like certain banks or insurance companies), the restructuring tools of the IRDA are generally available to Singapore-incorporated companies, regardless of the capacity in which they operate.
3. Practical Utility for REITs and Business Trusts
Singapore is a global hub for REITs and Business Trusts. These entities often carry significant debt loads and operate through complex offshore/onshore structures. This case confirms that when such an entity faces financial distress, the trustee or trustee-manager can invoke Section 64 of the IRDA to obtain a moratorium. This "breathing space" is crucial for preventing "vulture" creditors or dissenting shareholders from forcing a premature liquidation that would destroy value for all stakeholders. The decision provides a clear precedent that the "scheme of arrangement" is a viable tool for the S-REIT and Business Trust industry.
4. Balancing Shareholder Disputes and Creditor Interests
The case also illustrates how the court handles restructuring in the face of intense shareholder litigation. Kristy Tan JC’s decision to grant the moratorium despite the ZZC-Sino-Ocean feud shows that the court will prioritize the interests of the creditors and the preservation of the business over internal corporate squabbles. However, the imposition of "additional disclosure orders" demonstrates the court's willingness to use its equitable powers to ensure transparency and protect creditors from being caught in the crossfire of shareholder disputes.
Practice Pointers
- Trustee Liability: Practitioners must remember that a trustee-manager is the legal debtor for all contracts entered into for the trust. Restructuring the trust effectively means restructuring the trustee-manager.
- Standing for Moratoriums: When acting for a trustee-manager or REIT trustee, ensure the entity is not an "excluded company" under the IRDA's subsidiary legislation before filing for a moratorium.
- Creditor Support: While 75% support is needed to pass a scheme, a moratorium can be granted with much lower support (e.g., the 53.06% seen here), provided the court is satisfied the scheme is not "doomed to failure."
- Disclosure is Key: In cases involving complex subsidiary structures (like PRC malls), be prepared to offer or accept enhanced disclosure orders to satisfy the court's requirement for transparency.
- Interplay with Winding-Up: A Section 64 moratorium automatically stays a pending winding-up application (s 64(8)). This is a powerful tool for companies facing "just and equitable" winding-up petitions during a restructuring.
- Drafting the Scheme: At the moratorium stage, the scheme proposal does not need to be a final legal document, but it must contain enough "meat" (e.g., proposed maturity extensions, debt-to-equity terms) to show feasibility.
Subsequent Treatment
As a 2025 decision, the subsequent treatment of Re Dasin Retail Trust Management Pte Ltd is in its early stages. However, it is expected to be the leading authority for any future restructuring involving Singapore-listed business trusts or REITs. It follows the liberal approach to moratoriums established in Re Picotin Pte Ltd and other matters [2024] SGHC 156 and Re Conchubar Aromatics Ltd and other matters [2015] SGHC 322, further expanding the "rehabilitative" reach of Singapore's insolvency laws.
Legislation Referenced
- Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed), Sections 2(1), 63(3), 64, 64(1), 64(2), 64(4), 64(8), 71, 252(1)
- Business Trusts Act 2004 (2020 Rev Ed), Sections 31, 28
- Companies Act 1967 (2020 Rev Ed), Section 210
- International Arbitration Act 1994 (2020 Rev Ed), Section 6
- Finance Companies Act 1967, Section 6
- Securities and Futures Act 2001
Cases Cited
- Followed/Applied:
- Re Picotin Pte Ltd and other matters [2024] SGHC 156
- Re Conchubar Aromatics Ltd and other matters [2015] SGHC 322
- Re IM Skaugen SE and other matters [2019] 3 SLR 979
- Re Pacific Andes Resources Development Ltd and other matters [2018] 5 SLR 125
- Referred to:
- Lian Chee Kek Buddhist Temple v Ong Ai Moi and others [2024] 5 SLR 1213
- E C Investment Holding Pte Ltd v Ridout Residence Pte Ltd [2013] 4 SLR 123
- Equity Trust (Jersey) Ltd v Halabi [2023] AC 877
- Re All Measure Technology (S) Pte Ltd [2023] 5 SLR 1421
- Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth and others (2019) 368 ALR 390
- Distinguished:
- Re Tantleff, Alan [2023] 3 SLR 250