A proof of debt in the context of judicial management is a document submitted by a creditor to substantiate the debts owed to it by the company under judicial management (“The Company”). The term “creditor” has been defined by the Court to include all persons having any monetary claims against the Company.1

Proof of debt is the ticket for a creditor to attend and vote in creditor meetings and to received entitlement under the approved Statement of Proposal. In addition, the value of debts accepted will determine the weight of a creditor’s vote as the approval of the Statement of Proposal is dependent on the votes of the total value of creditors whose claims have been accepted and present at the meeting.2

Generally, the power to accept or reject proof of debt lies in the hand of the judicial manager. In so doing, the judicial manager shall be independent and act fairly in exercising the power. In the Singapore case of The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and Others v TT International Ltd and another Appeal [2012] SGCA 9, the Court of Appeal highlighted that the judicial manager must fact fairly in discharging his duty and must not favour the interests of his appointers over the other legitimate claimants of the company’s assets.

Despite the Court is generally slow to interfere with the decision of the judicial manager, case laws suggest that the Court is more ready to interfere with the judicial manager’s decision in situations where the judicial manager has acted in bad faith, or when the judicial manager has committed a mistake as to the facts or errors of law or principle3.

The creditor who is aggrieved by the decision of the judicial manager can apply to the Court for relief pursuant to Section 426 Companies Act 2016 provides the following: –

“425    (1) At any time when a judicial management order is in force, a creditor or member of the company may apply to the Court for an order under this section on the ground that –

 (a) The company’s affairs, business and property are being or have been managed by the judicial manager in a manner which is or was unfairly prejudicial to the interests of its creditors or members, including at least the creditor or member himself, or of a single creditor that represents twenty-five per centum in value of the claims against the company; or

 (b) Any actual or proposed act or omission of the judicial manager is or would be so prejudicial.

To succeed in the application, the creditors have to prove to the Court that the judicial manager’s decision is tainted with bad faith, contain an error of law or facts which justifies the Court’s intervention. If the creditors managed to convince the Court that the decision of the judicial manager is unsustainable, the Court may give the relief in respect of the matters complained of or to make any interim order which the Court thinks fit, including setting aside the decision of the judicial manager.

1 Spacious Glory Sdn Bhd v Coconut Three Sdn Bhd (previously known as Nexgram Land Sdn Bhd [2020] MLJU 1827

2 Section 421 Companies Act 2016

3 Capital City Property Sdn Bhd v Achwell Property Sdn Bhd [2021] MLJU 749, the High Court referred to the Singapore Court of Appeal case of The Royal Bank of Scotland NV (formerly known as ABN Amro Bank NV) and Others v TT International Ltd and another Appeal [2012] SGCA 9

 

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