04:30 PM Jacelyn Chan (Head, Knowledge Management & Training and Litigation Support, Drew & Napier LLC)

    The Rights of Liquidators to Access Documents and Working Papers of an Insolvent Company: PricewaterhouseCoopers LLP and others v Celestial Nutrifoods Ltd (in compulsory liquidation) [2015] SGCA 20



    In a recent landmark ruling, the Singapore Court of Appeal (“CA”) granted an application by the liquidator of Celestial Nutrifoods Ltd (“Celestial”) under section 285 of the Companies Act (Cap 50, 2006 Rev Ed) (“Companies Act”) for documents in the custody, power or control of the auditors, PricewaterhouseCoopers LLP (“PWC”), which relate to the insolvent company’s trade dealings, affairs and property.  In coming to its decision, the CA took the opportunity to reiterate the principles that govern the exercise of the court’s power to grant orders under section 285 of the Companies Act and the corresponding procedure that should be adopted. 

    Section 285 of the Companies Act allows a liquidator to obtain information on an insolvent company’s affairs and provides that a court may summon any officer of the company of person known or suspected to have in his possession any property of the company or any person whom the court considers capable of giving information concerning the promotion, formation, trade dealings, affairs or property of the company. The court may also require such a person to produce any books and papers in his custody or power relating to the company.


    Celestial was a company incorporated in Bermuda and listed on the Singapore Exchange.  Celestial owned three subsidiaries incorporated in the British Virgin Islands (“BVI”) which each operated as the investment holding company for each of three subsidiaries incorporated in the People’s Republic of China (“PRC”).  Celestial’s PRC subsidiaries conducted the group operations.

    Celestial raised $235 million from investors by issuing Zero Coupon Convertible Bonds.  The bondholders were all granted put options which allowed them to compel Celestial to redeem the bonds at 116.5% of their face value.  Subsequently, a majority of the bondholders exercised their put options and required Celestial to redeem the bonds.  Celestial failed to do so by the due date.  As a result, BNY Corporate Trustee Services Ltd (“BNY”), the trustee of the bonds, issued a statutory demand against Celestial for the amount that was due under the bonds.  Celestial failed to satisfy the statutory demand and BNY commenced winding up proceedings against Celestial. The Singapore High Court (“HC”) granted the winding up order and appointed Celestial’s liquidator.

    Celestial’s liquidator was unable to obtain any assistance from the management and directors of Celestial, who was based in the PRC, concerning the business affairs of Celestial and its subsidiaries.  However, based on the information and documents obtained, Celestial’s liquidator identified several suspicious and/or irregular transactions which required further investigation.

    Celestial’s liquidator then brought an application in the HC under section 285 of the Companies Act to compel Celestial’s auditors, PWC, to disclose documents in their custody, power or control relating to Celestial’s trade dealings, affairs and property. Celestial’s liquidator argued that he needed those documents for a proper analysis of Celestial’s consolidated financial statements and year-end balances, as well as to properly investigate into various suspicious transactions which he had uncovered.   In addition, Celestial’s liquidator also asked the HC for access to PWC’s working papers.

    PWC resisted the application by Celestial’s liquidator for the disclosure of documents and argued that Celestial’s liquidator was not an objective liquidator as he was financially incentivised to pursue a claim against PWC and that the true motivation of Celestial’s liquidator in making this application under section 285 of the Companies Act was to obtain evidence for a negligence suit against PWC. PWC also argued that compliance with the request for disclosure may require PWC to do acts that are illegal under PRC law, and in any event, the request by Celestial’s liquidator was too wide.

    The HC granted the application by Celestial’s liquidator and PWC appealed against the HC’s decision.  

    Decision of the Court of Appeal

    The CA dismissed PWC’s appeal as Celestial’s liquidator had shown that he had a reasonable belief that PWC was able to assist him and that the documents he sought from PWC were reasonably required. The CA also dismissed PWC’s argument that Celestial’s liquidator was not objective. Although Celestial’s liquidator might have been financially incentivised if he could identify potential claims against PWC, it was also in the interest of all the creditors that a proper investigation be done to determine whether there were any viable claims against third parties. Apart from being an officer of the court, Celestial’s liquidator also had his own professional reputation to protect. In the event that Celestial’s liquidator acted unreasonably in pursuing frivolous claims, the court could order personal costs against him and this should be a sufficient disincentive for him to act irresponsibly.

    The CA held that the mere fact that PWC’s working papers were the property of PWC and contain proprietary information cannot, by itself, form a basis for resisting the application by Celestial’s liquidator. PWC’s working papers should be disclosed so long as they contain information that is of relevance to the investigation conducted by Celestial’s liquidator.

    The CA was also not convinced by PWC’s argument that they would, as a result of complying with the disclosure order, expose themselves to civil and criminal sanctions under PRC law. The CA further held that the order granted by the HC for the disclosure of all documents relating to Celestial during the period that PWC was engaged as Celestial’s auditors and which were in PWC’s possession, custody or control was not too wide as it is not uncommon for courts to grant orders compelling parties to disclose all documents in their possession, custody or control relating to the insolvent company in question.  

    In its judgment, the CA reiterated the observations made by the HC in the case of Liquidator of W&P Piling Pte Ltd v Chew Yin What and others [2004] 3 SLR(R) 164 that section 285 of the Companies Act should not be interpreted in a restrictive manner and can be used to assist a liquidator in gathering information, including information that the company may not have been aware of prior to insolvency that would assist a liquidator in discharging his duties.  An order can be made under section 285 of the Companies Act even if litigation is contemplated such that pre-action procedures for information and/or documents would apply.

    The CA also set out the following two-stage test that should be used in deciding whether to grant an application under section 285 of the Companies Act:

    (1)      The liquidator must first show there is some reasonable basis for his belief that the person can assist him in obtaining relevant information and/or documents, and that the information and/or documents are reasonably (and not absolutely) required. In determining whether this threshold is met, there is a general predisposition in favour of the liquidator’s views (rather than the views of an officer of the company) as he, being an officer of the court, is presumed to be neutral, independent and acting in the best interest of the company. The court will not generally require the liquidator to specify the information/documents which are to be produced with great precision as the liquidator is ordinarily a stranger to the company.

    (2)      The courts will then have to balance conflicting interests. While the power conferred under section 285 of the Companies Act enables investigations to be carried out, and where necessary, for action to be taken, the court should be careful not to make an order that is wholly unreasonable, unnecessary or oppressive to the parties concerned.

    The CA articulated the following considerations, which are relevant to the balancing exercise in the second stage of the two-stage test:

    (1) In the case of third parties, the absence of a fiduciary or contractual relationship with the company should not fetter the exercise of that power vis-à-vis those third parties as long as the third party is able to provide relevant information and/or documents.

    (2)While the risk of a party being exposed to liability is a matter which is relevant to determining whether there would be oppression, it is merely a factor, and does not present a bar against making of an order.

    (3)While section 285 of the Companies Act does not differentiate between the production of documents and the oral examination of witnesses, an order for oral examination is much more likely to be oppressive than an order for the production of documents.

    (4)The risk of exposure to a claim for serious wrongdoing/fraud carries with it an element of oppression as it is oppressive to require someone suspected of serious wrongdoing/fraud to prove the case against himself on oath, but it is not a conclusive factor as there is a public interest in the investigation of fraud.

    (5) Attempts to gain undue advantages in the litigation process will be closely scrutinised to prevent abuse.

    (6)The court will give weight to the risk that compliance might expose a party to claims for breach of confidence, or criminal penalties in the jurisdiction in which the documents are situated. Where there is a real risk, the court will be slow to order production.

    (7)The court will consider the practical burden imposed when a great deal of time and expense is required to comply with an order for disclosure of documents.


    The CA decision in this case of Celestial Nutrifoods provides a definitive ruling on the principles and procedure that govern the exercise of the court’s power to grant orders in an application under section 285 of the Companies Act.  Although there have previously been several decisions by the Singapore HC on section 285 of the Companies Act, this is the first time that the CA has been asked to rule on section 285 of the Companies Act.

    Following from decision of the CA, auditors should take note of the broad reach of section 285 of the Companies Act, under which a liquidator can make an application for documents and/or information, including proprietary documents and working papers, as long as such documents and working papers contain information that is of relevance to the investigation conducted by Celestial’s liquidator.

    Although the courts will consider the burdens imposed and the potential risk of exposure to claims for breach of confidence or criminal penalties on the party ordered to comply with an order for disclosure of documents, it is likely that the Singapore courts will rule in favour of disclosure of the documents and/or information sought, unless such disclosure is wholly unreasonable, unnecessary or oppressive. 

    As such, auditors must take steps to assess whether there is a real risk that the disclosure of documents and/or information in their custody, possession or control that relate to a company that they have audited will result in criminal penalties or other civil proceedings in the jurisdiction where the documents are kept, and should seek legal advice on this issue, if necessary.

    Auditors should also review their document management processes in light of this decision to ensure that their working papers and other proprietary documents are properly retained and easily accessible in the event that an order under section 285 of the Companies Act is made for the disclosure and production of such documents.

    * This blog entry may be cited as Jacelyn Chan, “The Rights of Liquidators to Access Documents and Working Papers of an Insolvent Company”, Singapore Law Blog (28 September 2015) (

    ** A PDF version of this entry may be downloaded here

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