Reed Smith Client Alerts

Key takeaways
  • Liquidator may apply to the court under Rule 133(1) of CIR Rules to expunge or reduce previously admitted proof of debt
  • Test under Rule 133(1) of CIR Rules is two-fold:
    • Whether the liquidator thinks there has been improper proof of debt admission
    • Whether the court should expunge or reduce the proof of debt

Authors: Johnny Lim Adrian Aw (Resource Law LLC), Si Ting Chua (Resource Law LLC)

In Yit Chee Wah and another v. Inner Mongolia Huomei-Hongjun Aluminium Electricity Co., Ltd. and another appeal [2025] SGCA 27, the Singapore Court of Appeal took the opportunity to clarify the law in relation to an application made pursuant to Rule 133(1) of the Insolvency, Restructuring and Dissolution (Corporate Insolvency and Restructuring Rules 2020 (CIR Rules) by a liquidator to expunge or reduce a proof of debt (POD) that had previously been admitted as part of the adjudication process.

Background

Zhong Jun Resources (S) Pte. Ltd. (in liquidation) (the Company) was in the metal trading business and was part of a broader group of entities (the Dezheng Group). In the course of its business, the Company entered into commodity financing arrangements with various banks. It was subsequently discovered that multiple trade documents may have been issued by the Dezheng Group entities to fraudulently obtain financing from multiple banks over the same inventory. While investigations were ongoing, the Hongkong and Shanghai Banking Corporation successfully obtained a winding-up order from the Singapore court against the Company.

In August 2015, the then liquidators of the Company partially admitted the PODs filed by Inner Mongolia Huomei-Hongjun Aluminium Electricity Co., Ltd. (Inner Mongolia) and Shenzhen Huomei-Hongjun Aluminium Trading Co., Ltd. (Shenzhen). Inner Mongolia and Shenzhen were both part of the Dezheng Group. In or around December 2019, the liquidators discovered that former controllers of the Dezheng Group had been convicted of metal financing fraud, following which the liquidators commenced further investigations into related companies that traded with the Company, including Inner Mongolia and Shenzhen.

Subsequently, in late 2020, Mr Yit Chee Wah (the Liquidator) was appointed as the sole liquidator of the Company. After conducting further investigations and with the assistance of data from a vessel-tracking website (VesselFinder), the Liquidator formed the view that the supporting documents from Inner Mongolia and Shenzhen were fraudulent, and that the underlying trades forming the basis of the claims stated in the PODs were fictitious and had not taken place.

Given the circumstances, the Liquidator issued notices to Inner Mongolia and Shenzhen informing them of his intention to apply to the court to expunge their PODs. The Liquidator’s application under Rule 133(1) of the CIR Rules to the High Court to expunge Inner Mongolia's and Shenzhen's PODs was dismissed, and the Liquidator appealed.