Tay Lak Khoon v Tan Wei Cheong (as judicial manager of USP Group Ltd) and others [2025] SGCA 41

Case Details

• Citation: [2025] SGCA 41
• Court: Court of Appeal of the Republic of Singapore
• Decision Date: 2 September 2025
• Coram: Sundaresh Menon CJ, Steven Chong JCA, Kannan Ramesh JAD
• Case Number: Civil Appeal No 74 of 2024; SUM 9 of 2025
• Hearing Date(s): 15 May 2025
• Appellant: Tay Lak Khoon
• Respondents: (1) Tan Wei Cheong (as Judicial Manager of USP Group Limited); (2) Lim Loo Khoon (as Judicial Manager of USP Group Limited); (3) USP Group Limited (under judicial management)
• Counsel for Appellant: Lim Tahn Lin Alfred, Lye May-Yee Jaime and Tan Liqi Joseph (Meritus Law LLC)
• Counsel for Respondents: Ng Hui Ping Sheila and Chew Jing Wei (Rajah & Tann Singapore LLP)
• Practice Areas: Insolvency Law; Administration of insolvent estates; Judicial management; Removal of judicial manager

Summary

The Court of Appeal in Tay Lak Khoon v Tan Wei Cheong [2025] SGCA 41 has provided definitive guidance on the threshold and criteria for the removal of judicial managers (JMs) under section 104(1) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA). The dispute arose from a creditor's challenge to the conduct of JMs during a creditors' meeting, specifically regarding their decision to admit votes from entities allegedly related to the debtor company and their rejection of certain proxies. The appellant, a creditor, sought the removal of the JMs on the basis that these decisions created a reasonable apprehension of bias, suggesting the JMs were not acting impartially in the interests of the general body of creditors.

The Court of Appeal dismissed the appeal, affirming the High Court's decision that "due cause" for removal had not been established. Central to the court's reasoning was the principle that JMs, as officers of the court, are afforded a degree of protection when they act reasonably and in good faith, particularly when navigating unsettled areas of law. The court held that the JMs' reliance on professional legal advice regarding the treatment of related-party votes was a significant factor in negating any reasonable apprehension of bias. Even if the JMs' ultimate decision on the voting was legally incorrect—a point the court discussed but did not definitively rule upon due to the lack of a cross-appeal—the act of seeking and following legal advice demonstrated a commitment to procedural fairness rather than a predisposition toward any particular party.

This judgment is doctrinally significant as it formally imports the "two-stage test" used for the removal of liquidators into the context of judicial management. The court clarified that the assessment of "due cause" requires both an evaluation of the purposes of the judicial management and a determination of whether removal is in the "real, substantial and honest interest" of the administration. By aligning the standards for JMs and liquidators, the Court of Appeal has ensured consistency across different insolvency regimes in Singapore, emphasizing that removal is an extreme measure that should not be invoked merely because a creditor disagrees with a professional judgment call made by the office-holder.

Furthermore, the case underscores the importance of the "fair-minded and informed observer" test in assessing bias within insolvency proceedings. The court emphasized that such an observer would be aware of the complexities of judicial management and the necessity for JMs to make difficult decisions on short timelines. The ruling provides a robust shield for insolvency practitioners, confirming that reasonable reliance on legal counsel serves as a primary defense against allegations of bias, thereby maintaining the stability and integrity of the judicial management process in Singapore.

Timeline of Events

1. 11 March 2024: USP Group Limited (the "Company") is placed under interim judicial management, with Tan Wei Cheong and Lim Loo Khoon appointed as interim judicial managers.
2. 24 April 2024: The JMs, acting in their capacity as interim judicial managers, cause the Company to enter into an Implementation Agreement (the "IA") to facilitate restructuring.
3. 11 June 2024: A key date in the procedural history regarding the management of the Company's affairs under the JMs.
4. 29 July 2024: A date associated with the ongoing administration and preparation for the creditors' meeting.
5. 3 September 2024: Further procedural steps taken by the JMs in relation to the Statement of Proposals (SOP).
6. 4 September 2024: The creditors' meeting is convened for creditors to consider and vote on the SOP put forward by the JMs.
7. 6 September 2024: Continued deliberations or actions following the initial creditors' meeting.
8. 27 September 2024: A date relevant to the finalization of the voting results or the JMs' report on the SOP.
9. 4 October 2024: The Appellant, Tay Lak Khoon, commences proceedings in the High Court via HC/OA 1024/2024 ("OA 1024") seeking the removal of the JMs.
10. 17 October 2024: A consent order is entered in OA 1024, including an interim injunction to restrain the JMs from carrying out the restructuring plan, with costs reserved.
11. 15 May 2025: The substantive hearing of the appeal (Civil Appeal No 74 of 2024) takes place before the Court of Appeal.
12. 2 September 2025: The Court of Appeal delivers its judgment, dismissing the appeal and awarding costs to the JMs.

What Were the Facts of This Case?

USP Group Limited (the "Company") faced significant financial distress and was placed under interim judicial management on 11 March 2024. Tan Wei Cheong and Lim Loo Khoon were appointed as the interim judicial managers and subsequently as the judicial managers (the "JMs"). Their primary mandate was to explore restructuring options that would provide a better return to creditors than a near-term liquidation. To this end, the JMs caused the Company to enter into an Implementation Agreement (the "IA") on 24 April 2024, which formed the backbone of their proposed restructuring plan.

The JMs prepared a Statement of Proposals (SOP) which included two critical resolutions: the first to approve the restructuring plan as outlined in the IA, and the second to extend the duration of the judicial management order to allow for the plan's execution. A creditors' meeting was scheduled for 4 September 2024 to vote on these resolutions. The appellant, Tay Lak Khoon, was a creditor of the Company with a claim amounting to $394,500. Prior to the meeting, the appellant raised strenuous objections regarding the eligibility of certain voting parties.

The controversy centered on two main groups of votes. First, there were certain "Entities" whose independence was questioned by the appellant. The appellant argued that these Entities were related to the Company or its management and that their votes should be disregarded to prevent the restructuring plan from being "forced through" by insider interests. Second, there were proxies submitted by NYC and UniLegal. The JMs refused to permit these proxies to vote, citing procedural irregularities or lack of sufficient documentation. The appellant contended that the JMs' decision to admit the Entities' votes while rejecting the NYC and UniLegal proxies demonstrated a lack of impartiality and a bias in favor of the proposed restructuring plan.

At the creditors' meeting, the JMs proceeded to accept the votes of the Entities. The results were as follows:

• Resolution 1 (Restructuring Plan): Approved by 58.06% in number and 89.31% in value of the creditors present and voting.
• Resolution 2 (Extension of JM Order): Approved by 60.61% in number and 89.78% in value of the creditors present and voting.

The appellant voted against both resolutions. Had the Entities' votes been excluded, the outcome of the resolutions would likely have been different, particularly regarding the value threshold required for approval. The appellant subsequently filed HC/OA 1024/2024 on 4 October 2024, seeking the removal of the JMs under section 104(1) of the IRDA. He alleged that the JMs' conduct in the voting process gave rise to a reasonable apprehension of bias.

In the High Court, the judge in [2024] SGHC 312 (the "GD") expressed the view that the JMs had erred in law by admitting the votes of the Entities. The High Court judge reasoned that in the context of a vote to approve an SOP, the votes of related parties should generally be excluded or at least discounted to ensure the integrity of the creditor democracy. However, the judge ultimately declined to remove the JMs, finding that their error was one of legal judgment made in good faith and based on legal advice, rather than an indication of bias. The judge made no order as to costs for the application below. The appellant appealed both the refusal to remove the JMs and the costs order.

What Were the Key Legal Issues?

The appeal raised several critical questions regarding the administration of insolvent estates and the standards of conduct expected of court-appointed officers:

• The Test for Removal: What is the precise legal test for the removal of a judicial manager for "due cause" under section 104(1) of the Insolvency, Restructuring and Dissolution Act 2018? Specifically, does the two-stage test established for liquidators apply to JMs?
• Reasonable Apprehension of Bias: Did the JMs' decision to accept the Entities' votes and reject the NYC/UniLegal proxies create a reasonable apprehension of bias in the mind of a fair-minded and informed observer?
• The Role of Legal Advice: To what extent does a JM's reliance on professional legal advice insulate them from a finding of "due cause" for removal, especially when that advice concerns an unsettled or complex point of law?
• Treatment of Related-Party Votes: Although not the primary issue for the removal application, the court had to consider whether the JMs were correct to admit the votes of related parties in a meeting to approve an SOP.
• Appellate Intervention on Costs: Whether the High Court judge erred in making "no order as to costs" in the proceedings below, and whether the appellant was entitled to costs as a "successful" party on the legal merits of the voting issue.

How Did the Court Analyse the Issues?

The Court of Appeal's analysis began with a thorough examination of the statutory basis for removing a judicial manager. Section 104(1) of the IRDA provides that the court may, "on cause shown," remove a judicial manager and appoint another. The court noted that while the IRDA does not define "cause shown," the phrase has a long history in insolvency law.

The Two-Stage Test for Removal

The court explicitly adopted the two-stage test previously applied to the removal of liquidators, as articulated in DB International Trust (Singapore) Ltd v Medora Xerxes Jamshid [2023] 5 SLR 773. The court stated at [26]:

"The two-stage test is as follows (DB International at [13]):
(a) an assessment by the court of the purposes for which the liquidator was appointed, which is co-extensive with the purposes of the liquidation; and
(b) an assessment by the court of whether the removal of the liquidator is in the real, substantial and honest interest of the liquidation"

The court reasoned that the roles of a liquidator and a JM are sufficiently analogous—both are court-appointed officers with fiduciary-like duties to the general body of creditors—to justify a common standard for removal. The "real, substantial and honest interest" of the judicial management is the "principal guide" (citing Petroships [2018] 3 SLR 687 at [125]).

Reasonable Apprehension of Bias

The appellant's primary argument was that the JMs' conduct gave rise to a reasonable apprehension of bias. The court applied the standard of the "fair-minded and informed observer" as set out in DJP and others v DJO [2025] 1 SLR 576. At [52], the court noted that this observer "would be taken to know the nature of the office of a JM and the context in which a JM operates."

The court analyzed the JMs' decision-making process regarding the votes. It found that the JMs did not act arbitrarily. Instead, they had sought legal advice from their solicitors on how to handle the Entities' votes and the proxies. The court emphasized that the legal position on whether related-party votes must be excluded in a JM meeting (as opposed to a scheme of arrangement meeting) was not settled in Singapore law at the time. Therefore, the JMs' decision to follow their counsel's advice—even if that advice was later questioned by the High Court—was the hallmark of a professional and reasonable approach, not bias.

The Impact of Legal Advice

The court drew a parallel with the duties of directors, citing Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others [2018] 2 SLR 655 and Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] 1 SLR 361. These cases establish that taking and following legal advice is strong evidence that a person has acted reasonably and in good faith. The court held that this principle applies with equal, if not greater, force to JMs. At [54], the court observed that where a JM takes legal advice on an unsettled point, it is difficult to see how a fair-minded observer could conclude there was a "real danger" of lack of impartiality.

The Voting Issue and Related Parties

The court addressed the High Court's finding that the Entities' votes should have been excluded. While the JMs did not cross-appeal this finding, the Court of Appeal expressed some reservations. It noted that the principles governing schemes of arrangement (where related-party votes are often discounted or placed in separate classes) might not apply directly to a vote on an SOP in judicial management. The court cited TT International [2012] 2 SLR 213 and SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd [2017] 2 SLR 898, noting that the statutory frameworks differ. However, because the JMs had not formally challenged the High Court's ruling on the voting error, the Court of Appeal did not need to make a final determination on the "correct" treatment of those votes to resolve the removal issue.

Rejection of Proxies

Regarding the NYC and UniLegal proxies, the court found that the JMs had provided plausible reasons for their rejection based on the information available at the time. There was no evidence that the JMs had applied a double standard or had intentionally sought to suppress dissenting voices. The court concluded that these were administrative decisions within the JMs' discretion, and even if they were technically incorrect, they did not meet the high threshold for "due cause" for removal.

What Was the Outcome?

The Court of Appeal dismissed the appeal in its entirety. The court affirmed that the appellant had failed to show "due cause" for the removal of the JMs. The JMs were found to have acted reasonably by relying on legal advice on an unsettled point of law, which precluded a finding of reasonable apprehension of bias.

The operative conclusion of the court was stated at [85]:

"For the reasons above, we dismissed the appeal and awarded the JMs the costs of the appeal and SUM 9 in the aggregate sum of $75,000 inclusive of disbursements."

Regarding the costs of the High Court proceedings (OA 1024), the Court of Appeal declined to disturb the judge's decision to make no order as to costs. The court applied the principles from Goh Chok Tong v Jeyaretnam Joshua Benjamin [1998] 2 SLR(R) 971, noting that an appellate court will only intervene in a costs order if there has been an error of principle or if the decision is "manifestly wrong." Since the High Court judge had found that the JMs had erred in law (even if that error didn't justify removal), the decision to deny the JMs their costs below was within the judge's broad discretion. Conversely, the appellant was not entitled to costs because he had failed in his primary objective: the removal of the JMs.

The final orders were:

• The appeal against the refusal to remove the JMs was dismissed.
• The appeal against the "no order as to costs" in OA 1024 was dismissed.
• The JMs were awarded costs for the appeal and SUM 9, fixed at $75,000 inclusive of disbursements.

Why Does This Case Matter?

This judgment is a landmark decision for Singapore's insolvency landscape, providing much-needed clarity on the standards governing the removal of judicial managers. By adopting the "two-stage test" from the liquidation context, the Court of Appeal has unified the jurisprudence on the removal of court-appointed insolvency office-holders. This provides a predictable framework for both practitioners and creditors, ensuring that the "real, substantial and honest interest" of the estate remains the paramount consideration.

The case is particularly significant for its robust defense of the role of professional advice. In the high-stakes environment of judicial management, JMs are often required to make complex decisions under extreme time pressure. The Court of Appeal's ruling that reasonable reliance on legal advice—even if that advice is later found to be legally flawed—negates an apprehension of bias is a vital protection for the profession. It encourages JMs to seek expert guidance and ensures they will not be removed for good-faith errors in judgment on unsettled legal points. This promotes stability in the restructuring process, as JMs can proceed with their duties without the constant threat of removal for every contested decision.

Furthermore, the court's discussion of related-party voting in the context of an SOP highlights a potential area for future legal development. While the court did not definitively rule on whether the High Court was correct to exclude the Entities' votes, its observations suggest that the "creditor democracy" in judicial management may require a more nuanced approach than a simple majority vote when related parties are involved. Practitioners must now be acutely aware of the risks associated with admitting such votes and should consider the High Court's cautionary remarks in the GD, even if the JMs in this specific case were not removed for their actions.

The decision also reinforces the high threshold for appellate intervention in costs orders. By upholding the "no order as to costs" below, the court signaled that High Court judges have significant leeway to balance the "success" of a party on specific legal issues against their failure on the ultimate relief sought. This serves as a reminder to litigants that pursuing a "moral victory" on a legal point may not result in a costs award if the primary application is dismissed.

Finally, the case clarifies the "fair-minded and informed observer" test in the specific context of insolvency. The observer is not a layperson with no knowledge of the law, but someone who understands the statutory duties of a JM and the practical realities of insolvency administration. This sophisticated standard prevents the removal of JMs based on superficial or uninformed allegations of bias, thereby safeguarding the integrity of the judicial management regime in Singapore.

Practice Pointers

• Seek and Document Legal Advice: JMs should proactively seek legal advice on contentious issues, such as the admission of proofs of debt or the treatment of related-party votes. Documenting this advice and the JMs' subsequent deliberations is crucial for defending against allegations of bias or "due cause" for removal.
• Understand the Two-Stage Test: Practitioners must be prepared to address both the "purposes of the appointment" and the "real, substantial and honest interest of the estate" when bringing or defending a removal application under s 104(1) IRDA.
• Caution with Related-Party Votes: While the law remains somewhat unsettled, JMs should exercise extreme caution when admitting votes from entities with close ties to the debtor. Consider the High Court's view in [2024] SGHC 312 that such votes may need to be discounted to preserve the integrity of the SOP approval process.
• Procedural Rigor in Proxy Management: Ensure that the rejection of any proxy is based on clear, documented procedural grounds. Consistency in how proxies are treated across different creditor groups is essential to avoid the appearance of a "double standard."
• Officer of the Court Status: JMs should always act with the awareness that they are officers of the court. Their primary duty is to the general body of creditors, and their decisions must be demonstrably impartial and aimed at achieving the statutory objectives of judicial management.
• Costs Risks: Creditors should be aware that failing to secure the removal of a JM, even if they succeed on a subsidiary legal point, may result in no costs being awarded in their favor, or worse, an adverse costs order at the appellate level.

Subsequent Treatment

As a recent decision from the Court of Appeal delivered in September 2025, Tay Lak Khoon v Tan Wei Cheong [2025] SGCA 41 represents the current authoritative statement on the removal of judicial managers in Singapore. It has clarified the application of the "due cause" standard and the relevance of legal advice in bias inquiries. Given its alignment of the JM removal test with the established liquidator removal test from DB International, it is expected to be followed in all future applications under section 104(1) of the IRDA.

Legislation Referenced

• Insolvency, Restructuring and Dissolution Act 2018 (2020 Rev Ed), s 104(1), s 104(1)(a), s 139(1), s 174, s 89(2)
• Companies Act (Cap 50, 2006 Rev Ed), s 268(1), s 302
• Insolvency Act 1986 (c 45) (UK), Schedule B1, para 88

Cases Cited

• Considered: DB International Trust (Singapore) Ltd v Medora Xerxes Jamshid [2023] 5 SLR 773
• Referred to: Tay Lak Khoon v Tan Wei Cheong (as Judicial Managers of USP Group Ltd) and others [2024] SGHC 312
• Referred to: Sapura Fabrication Sdn Bhd and others v GAS and another appeal [2025] 1 SLR 492
• Referred to: Petroships Investment Pte Ltd v Wealthplus Pte Ltd (in liquidation) (Petroships Pte Ltd and another, interveners) and another matter [2018] 3 SLR 687
• Referred to: Procam (Pte) Ltd v Nangle and another [1990] 1 SLR(R) 605
• Referred to: BOI v BOJ [2018] 2 SLR 1156
• Referred to: DJP and others v DJO [2025] 1 SLR 576
• Referred to: Turf Club Auto Emporium Pte Ltd and others v Yeo Boong Hua and others and another appeal [2018] 2 SLR 655
• Referred to: Foo Kian Beng v OP3 International Pte Ltd (in liquidation) [2024] 1 SLR 361
• Referred to: Nicholas Eng Teng Cheng v Government of the City of Buenos Aires [2024] 1 SLR 608
• Referred to: BCBC Singapore Pte Ltd and another v PT Bayan Resources TBK and another [2024] 1 SLR 1
• Referred to: Goh Chok Tong v Jeyaretnam Joshua Benjamin and another action [1998] 2 SLR(R) 971
• Referred to: Re Fortis Investments Ltd (formerly known as ABN Amro Bank NV) and others v TT International Ltd and another appeal [2012] 2 SLR 213
• Referred to: SK Engineering & Construction Co Ltd v Conchubar Aromatics Ltd and another appeal [2017] 2 SLR 898
• Referred to: Clark & another v Finnerty and another [2010] EWHC 2538 (Ch)
• Referred to: Sisu Capital Fund Ltd v Tucker [2005] EWHC 2170 (Ch)
• Referred to: Australian Securities and Investments Commission (ASIC) v Franklin (Liquidator) [2014] FCAFC 85
• Referred to: Korda, in the matter of Ten Network Holdings Ltd (Administrators Appointed) (Receivers and Managers Appointed) [2017] FCA 914
• Referred to: Re Newcastle Classic Developments Pty Ltd – as trustee for The Albans Unit Trust (1994) 14 ACSR 230
• Referred to: Commonwealth v Irving & NPC Manufacturing Pty Ltd (1996) 144 ALR 172

Source Documents

• Original judgment PDF: Download (PDF, hosted on Legal Wires CDN)
• Official eLitigation record: View on elitigation.sg