Chew Eu Hock Construction v Central Provident Fund Board: Scheme of Arrangement & Priority of CPF Contributions

In Chew Eu Hock Construction Co Pte Ltd (under judicial management) v Central Provident Fund Board, the High Court of Singapore addressed whether the Central Provident Fund (CPF) Board enjoys priority over other unsecured creditors in a scheme of arrangement under judicial management. The Judicial Manager (JM) of Chew Eu Hock Construction sought a court order to bind the CPF Board to a scheme where unsecured creditors' claims would be settled by converting them into shares of Chew Eu Hock Holdings Ltd. The CPF Board rejected the scheme, arguing that CPF contributions should be paid in cash and have priority. The court ruled against the CPF Board, holding that there is no legislation granting CPF contributions priority in judicial management proceedings and bound the CPF Board to the scheme of arrangement.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Order granted that the Central Provident Fund Board be bound by the scheme of arrangement.

1.3 Case Type

Insolvency

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

The High Court held that CPF contributions do not have priority over other unsecured creditors in judicial management proceedings, binding CPF Board to the scheme.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Central Provident Fund BoardDefendantStatutory BoardBound by the scheme of arrangementLost
Chew Eu Hock Construction Co Pte Ltd (under judicial management)PlaintiffCorporationOrder granted that the Central Provident Fund Board be bound by the scheme of arrangementWon

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Lim Fung PeenJohn Tan & Chan
Patrick AngRajah & Tann
Lynette LeeRajah & Tann

4. Facts

  1. Chew Eu Hock Construction Co Pte Ltd was placed under judicial management.
  2. The company proposed a scheme of arrangement to settle unsecured creditors' claims by converting them into shares of its parent company.
  3. The Central Provident Fund Board rejected the scheme, insisting on cash payment for outstanding CPF contributions.
  4. The CPF Board argued that it had priority as a creditor due to its statutory role.
  5. The Judicial Manager sought a court order to bind the CPF Board to the scheme.
  6. The CPF Board did not attend the creditors' meeting to voice its objections.
  7. The scheme of arrangement was approved by a majority of creditors and sanctioned by the court.

5. Formal Citations

  1. Chew Eu Hock Construction Co Pte Ltd (under judicial management) v Central Provident Fund Board, OS 495/2003, [2003] SGHC 199

6. Timeline

DateEvent
CPF contributions outstanding since April 1998
Tay Swee Sze appointed interim Judicial Manager
Tay Swee Sze appointed Judicial Manager
CEH entered into an agreement with Hiap Hoe Holdings Pte Ltd
Court sanctioned CEH's capital reduction exercise
Capital reduction deemed to have taken effect
Court directed the Company to convene a meeting of its unsecured creditors
JM posted notices of the meeting to all creditors including the defendants
Meeting of unsecured creditors held
CEH held an extraordinary general meeting
JM wrote to all creditors informing them that the scheme and the Statement of Proposals he proposed had been approved by an overwhelming majority
Court sanctioned the scheme of arrangement
Order of Court lodged with the Registrar of Companies; scheme became effective
Defendants informed the JM that they were unable to accept shares in CEH as payment of the arrears of CPF contributions owed by the Company
Defendants' solicitors rejected the shares issued by CEH
Defendants demanded CPF contributions from the Company
CEH alloted and issued shares to the unsecured creditors of the Company pursuant to the scheme
JM commenced Originating Summons
Court granted an order in terms of the prayers sought
Court made a further order for the shares to be sold and the nett sale proceeds thereof paid to the defendants
Decision Date

7. Legal Issues

  1. Priority of Central Provident Fund Contributions in Judicial Management
    • Outcome: The court held that CPF contributions do not have priority over other unsecured creditors in judicial management proceedings where a scheme of arrangement has been approved.
    • Category: Substantive
  2. Appropriate Time to Object to Scheme of Arrangement
    • Outcome: The court held that objections to a scheme of arrangement must be raised before the court sanctions the scheme.
    • Category: Procedural
    • Related Cases:
      • [2002] 1 HKC 172
      • 8 ACLR 973

8. Remedies Sought

  1. Order that the Central Provident Fund Board be bound by the scheme of arrangement
  2. Order that the allotment and issuance of shares constitutes a full and final discharge of liabilities

9. Cause of Actions

  • Application to bind a creditor to a scheme of arrangement

10. Practice Areas

  • Insolvency
  • Restructuring
  • Commercial Litigation

11. Industries

  • Construction
  • Finance

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
PN Electronic Pte Ltd v PPHigh CourtYes[1984-85] SLR 529SingaporeCited to explain the objectives behind the Central Provident Fund Act.
Soon Aik Marine & Engineering Pte LtdHigh CourtYes[1987] SLR 247SingaporeCited for the proposition that employers are required to pay CPF contributions and that the CPF Board can sue to recover sums due to the fund.
Re UDL Holdings LtdHong Kong Court of Final AppealYes[2002] 1 HKC 172Hong KongCited for the argument that objections to a scheme of arrangement should be raised when the judicial manager applies to court for sanction of the scheme.
Chief Commissioner of Pay-Roll Tax v Group Four Industries Pty LtdSupreme Court of New South WalesYes8 ACLR 973AustraliaCited for the principle that once a court approves a scheme of arrangement, it is binding notwithstanding any defect or irregularity.
Frick Australia v Pen Pak Ocean ProductsSupreme Court of QueenslandYes[1971] Qd R 286AustraliaCited to support the principle that a scheme of arrangement approved by the court should be treated as valid to avoid inconvenience to companies, creditors, shareholders, and the community.
Ray Brooks Pty Ltd v New South Wales Grains BoardSupreme Court of New South WalesYes41 ACSR 631AustraliaCited as an Australian case in the same vein as Chief Commissioner of Pay-Roll Tax v Group Four Industries Pty Ltd.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act s 210Singapore
Companies Act s 227(X)Singapore
Central Provident Fund Act Cap 36 s 12(1)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Judicial Management
  • Scheme of Arrangement
  • Central Provident Fund
  • CPF Contributions
  • Unsecured Creditors
  • Priority of Payment
  • Companies Act
  • Creditors' Meeting
  • Sanction of Scheme
  • Hiap Hoe
  • Central Depository

15.2 Keywords

  • Judicial Management
  • Scheme of Arrangement
  • CPF
  • Priority
  • Insolvency
  • Singapore

17. Areas of Law

Area NameRelevance Score
Schemes of Arrangement90
Judicial Management80
Company Law75
CPF Contributions70
Insolvency Law60
Bankruptcy60
Trust Law30
Banking and Finance25

16. Subjects

  • Insolvency
  • Corporate Law
  • Financial Law