AAR and another v AAS (liquidator and trustee of B and others) and others

JudgeAndrew Ang J
Judgment Date08 June 2009
Neutral Citation[2009] SGHC 139
Citation[2009] SGHC 139
Defendant CounselChua Beng Chye and Ng Yeow Khoon (KhattarWong)
Published date10 June 2009
Plaintiff CounselAndre Yeap SC and Dawn Tan (Rajah & Tann LLP) and Ng Lip Chih (NCL Law Asia LLP)
Date08 June 2009
Docket NumberOriginating Summons No 1309 of 2008 (Summons No 390 of 2009)
CourtHigh Court (Singapore)
Subject MatterVariation,Whether variation sought led to true preservation of status quo,Interlocutory injunction,Injunctions

8 June 2009

Andrew Ang J:

1 This is an application by the second respondent for a further variation of an order of court granting an injunction in favour of the applicants dated 14 October 2008 as varied by an order of court dated 24 October 2008 granted by Tay Yong Kwang J. In the current application, the second respondent sought an order for the applicants to remit the sum of 1 billion Philippine pesos (“PHP 1bn”) to the second respondent’s designated account pending the resolution of a dispute between the parties in ongoing arbitration proceedings failing which the injunction would stand discharged.

The facts

2 The first respondent is the liquidator and trustee of [B], a company incorporated in the Philippines that was declared bankrupt in 2000. [B]’s steel plant located in the [XXX], Philippines, was closed as a result. In December 2002, pursuant to a liquidation plan, the first respondent was appointed as liquidator and trustee for [B]. The third to twenty-fifth respondents are [B]’s secured creditors (“the Secured Creditors”). The twenty-sixth to twenty-eighth respondents are [B]’s shareholders. The second respondent was appointed to act as Collateral Trustee and/or Facility Agent on behalf of the Secured Creditors. Together with the first respondent, the Secured Creditors issued a global invitation to tender for [B]’s assets. [C], the applicants’ holding company, submitted a successful bid for various [B] assets. [C] incorporated the applicants as special purpose vehicles for the purpose of purchasing and holding those assets.

3 The purchase of [B]’s assets was effected under an Asset Purchase Agreement (“the APA”) which provided for a purchase price of PHP 13.25bn (“the Purchase Price”). The payment terms of the APA were as follows:

(a)

Down payment:

PHP 1bn;

(b)

Tranche A Note:

PHP 2bn over the next five years; and

(c)

Tranche B Note:

PHP 10.25bn over the next eight years.

4 The timeline for payment of the instalments were as follows:

Due Date

Payment Amount

15 October 2004

PHP 1bn

15 October 2006

PHP 250m

15 October 2007

PHP 250m

15 October 2008

PHP 500m

15 October 2009

PHP 1.75bn

15 October 2010

PHP 1.75bn

15 October 2011

PHP 1.75bn

15 October 2012

PHP 6bn

5 Additionally, the Tranche A and Tranche B Notes were governed by an Omnibus Agreement dated 15 October 2004 (“the Omnibus Agreement”). As security for all of the applicants’ obligations to the Secured Creditors, the applicants agreed to provide Standby Letters of Credit (“SBLCs”) under various terms in the APA and the Omnibus Agreement. The SBLCs were essentially security for the instalment payments to be made by the applicants towards the Purchase Price. Each of the SBLCs was to have a validity of one year and ten business days from the date of its issuance. The timeline for the applicants to provide the SBLCs under the APA and the Omnibus Agreement were as follows:

Due Date

SBLC Amount

15 October 2004

PHP 250m

15 October 2005

PHP 500m

15 October 2006

PHP 750m

15 October 2007

PHP 750m

15 October 2008

PHP 1bn

15 October 2009

PHP 1bn

15 October 2010

PHP 1bn

15 October 2011

PHP 1bn

6 Accordingly, by 15 October 2008, the applicants were to:

(a) make payment for the October 2008 instalment of PHP 500m; and

(b) furnish a fresh SBLC for PHP 1bn to secure the next instalment due on 15 October 2009.

However, a dispute between the parties arose in relation to the transaction. The applicants alleged that the respondents were in breach of their obligation under the APA to deliver the [B] assets to the applicants free and clear of all liens of any kind or nature whatsoever. The applicants claimed that the respondents’ failure to pay the accrued taxes in relation to the APA had resulted in some of the [B] assets being subject to a lien by the [XXX]. Arbitration proceedings were commenced to resolve this dispute. In light of these developments, the applicants filed an urgent application on 9 October 2008 in the Philippines courts seeking injunctive relief against the first and second respondents to prevent the latter from calling upon the applicants to carry out their obligations under the APA and the Omnibus Agreement. The Philippines court denied this application. On 13 October 2008, the applicants filed an ex-parte originating summons in the Singapore courts seeking largely the same injunctive relief and this was granted on 14 October 2008 (“the Injunction”). The pertinent terms of the Injunction are as follows:

1.

[It is ordered that the Respondents,] jointly and severally, be restrained and/or enjoined by way of an injunction ... from:

(4)

exercising all other legal rights and remedies which may now or hereafter be available to them under the Applicable Law, as defined in Article 1.1 of the APA,

for and/or in relation to the following:

(5)

the non-payment of the 2008 Instalment by the due date, i.e. 15 October 2008;

(6)

the failure to provide a standby letter of credit for the sum of 1 billion Philippine pesos ... as security for payment of the next instalment falling due on 15 October 2009 (“the 2009 Instalment”); and/or

(7)

the failure to increase the value of the Existing [SBLC] to secure payment of the 2009 Instalment,

until such time as the dispute between the parties relating to or in connection with their respective rights and obligations under the APA ... is finally settled by the arbitral tribunal, or such other time as may be decided by the tribunal.

2.

The Applicants’ obligations to pay any further instalments due under the APA, the Tranche A Note, the Tranche B Note and the [Omnibus Agreement], and to provide any further standby letter of credit or any standby letter of credit of increased value, be suspended, deferred and/or postponed until such reasonable time after the Respondents pay or cause to be paid all accrued pre-closing taxes together with all interests and penalties in relation thereto on the [B] Plant Land Assets (as defined in the APA) and cause the same to be delivered to the Applicants “free from and clear of all Liens of any kind or nature whatsoever”, or such other time as may be decided by the tribunal.

[emphasis in original]

The effect of the Injunction was that, until the dispute between the parties was resolved in the arbitration proceedings, the applicants did not need to make payment of the instalments or furnish any further SBLCs and this included the instalment payment of PHP 500m and the SBLC for PHP 1bn which was due on 15 October 2008.

7 On 23 October 2008, the second respondent filed an urgent application to vary the Injunction on the basis that the existing SBLC for PHP 750m (“the Existing SBLC”) issued by ANZ Philippines in favour of the second respondent would expire on 29 October and that the second respondent would suffer grave prejudice if this SBLC was not renewed. According to the second respondent, it would be relegated to the position of an unsecured creditor in respect of the amount of PHP 750m if the SBLC was not renewed. This application was granted by Tay J on 24 October 2008 who made the following orders (“the Variation Order”):

(1) If ANZ Philippines does not renew the [Existing] SBLC by 12 noon, 28 October 2008 (Philippines time), the Applicants are to give irrevocable instructions immediately to ANZ Philippines to remit 750million pesos to Second Respondent’s account in Philippines by close of banking hours on Tuesday 28 October 2008 (deemed to be 4 pm Philippines time) failing which the said Order of Court [the Injunction] shall stand discharged without need for further hearing or order.

(2) Second Respondent shall comply with the existing injunction and give [an] irrevocable undertaking to the Court and ANZ Philippines not to call on the [Existing] SBLC [ie, the SBLC for PHP 750m due to expire on 29 October 2008] once ANZ Philippines has complied with the Applicant’s irrevocable instructions as stated in (1).

(3) Second Respondent also irrevocably undertakes that the 750million pesos, once transferred to their account, shall not be subject to any set-off by Second Respondent or any other Respondents pending the final decision of the arbitral tribunal.

(4) The Second Respondent shall designate an account number for the transfer of the said sum [of PHP 750m] from ANZ Philippines to Second Respondent, by 5pm today [24 October 2008].

(5) [The costs of the application shall be costs] in the cause.

8 It will be noted that the court made no order in regard to the fresh SBLC for PHP 1bn due to be issued on 15 October 2008. Subsequently, ANZ Philippines did not renew the Existing SBLC and the applicants also failed to remit the PHP 750m by 4pm, 28 October 2008 (Philippines time). The second respondent sent the applicants a written notice dated 28 October 2008 at 4.05pm (“the Written Notice”) and declared the applicants to be in default of the...

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