Court of Appeal Clarifies Test for Removal of Judicial Managers

Introduction

In Singapore, judicial managers (“JMs“) appointed over a company are empowered to conduct a range of acts relating to the company’s business. However, JMs face removal if they fail to adhere to the legislative framework on judicial management. In Tay Lak Khoon v Tan Wei Cheong [2025] SGCA 41, the Singapore Court of Appeal (“CA“) set out the applicable test for when a JM may be removed for cause. In particular, the CA considered whether a JM may be removed for a decision based on legal advice.

The Appellant creditor in this case sought the removal of the JMs of a company on the ground of reasonable apprehension of bias, alleging that they had improperly admitted the votes of entities related to the company at a creditors’ meeting.

The High Court (“HC“) declined to order the removal of the JMs, and the CA upheld this decision. The CA held that the test for removal is whether it is in the real and substantial interest of the judicial management. On the facts, the CA found that the JMs were entitled to rely on legal advice from their solicitors on whether the votes of the related entities should be discounted, and that there was thus no reasonable apprehension of bias.

The JMs were successfully represented in this appeal by Sheila Ng and Chew Jing Wei of Rajah & Tann Singapore LLP.

Brief Facts

The Company has been placed under judicial management, upon which the 1^st Respondent and the 2^nd Respondent were appointed as JMs. The JMs caused the Company to enter into an Implementation Agreement to facilitate the restructuring of the Company. The JMs then conducted a creditors’ meeting to seek approval to proceed with a restructuring plan that provided for the implementation of the Implementation Agreement.

After the necessary majority of votes in favour of the restructuring had been obtained, the Appellant (a creditor of the Company), sought to invalidate the resolutions passed, and to remove the JMs on the ground of reasonable apprehension of bias. The Appellant alleged that:

• At the creditors’ meeting, the JMs had improperly admitted the votes of certain creditors that were related entities of the Company (“Related Entities“); and
• The JMs did not allow certain creditors’ proxies to vote.

The JMs submitted that their actions were informed by their solicitors’ advice on whether the Related Entities’ votes could be counted, which they had reasonably relied on, and that certain creditors’ proxies were not allowed to vote as they had not observed the applicable procedural requirements.

The HC declined to order the JMs’ removal. The Appellant appealed against the HC’s decision.

Holding of the CA

The CA dismissed the appeal, declining to order the removal of the JMs. The CA found no due cause for the removal of the JMs, as their conduct did not give rise to a reasonable apprehension of bias and was reasonable in the circumstances. 

Test for removal of JMs

The CA clarified that the test for removal is whether it is in the real and substantial interest of the judicial management. Removal is justified if it serves the best interests of the creditors and the judicial management process. 

In considering whether to remove a JM on the ground of a reasonable apprehension of bias, the test is whether a fair minded and well-informed observer who takes all relevant factors into account would reasonably apprehend bias. In this regard, a JM is entitled to rely on professional advice if the advice appears to be competent. The advice would not appear to be competent if a reasonable JM would have harboured concerns that it was not correct.

Conduct of the JMs

On the facts, the CA held that there was no reasonable apprehension of bias justifying the JMs’ removal.

• The JMs were entitled to rely on their solicitors’ legal advice to count the votes of the Related Entities as there was nothing to suggest that the advice was not competent. Further, the legal position on whether related party votes at a creditors’ meeting to approve a statement of proposals should be disregarded was not settled. The CA expressed reservations about whether the Judge was correct in deciding that the Related Entities’ votes ought to be disregarded, but the CA ultimately did not find it necessary to express a conclusive view on the matter.
• In any event, even if the JMs erred in counting the Related Entities’ votes, the CA was of the view that the JMs’ actions would have amounted to an honest mistake, which would not give rise to a reasonable apprehension of bias justifying their removal.
• The JMs’ refusal to allow certain creditors’ proxies to vote was justified, as they had failed to submit their proxy forms or proofs of debt in time. 

Concluding Words

The CA’s decision provides welcome clarification on the boundaries of a JM’s conduct and on what actions may result in a JM’s removal. It highlights that the overarching concern is the real and substantial interest of the judicial management.

The decision also demonstrates the importance of obtaining competent professional advice before embarking on procedural decisions, particularly where it relates to legal issues that may require further analysis. Insolvency practitioners should ensure that they are duly advised so as to avoid allegations of bias or other impropriety.

For further queries, please feel free to contact our team listed on this page.