Anan Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Co)

• Judge: Sundaresh Menon CJ
• Judgment Date: 23 July 2019
• Neutral Citation: [2019] SGCA 41
• Citation: [2019] SGCA 41
• Court: Court of Appeal (Singapore)
• Published date: 26 July 2019
• Docket Number: Civil Appeal No 174 of 2018 (Summons No 33 of 2019)
• Plaintiff Counsel: Lee Eng Beng SC and Chew Xiang (Rajah & Tann Singapore LLP)
• Defendant Counsel: Philip Antony Jeyaretnam SC, Shobna d/o V Chandran, Lee Chia Ming, and Ashwin Nair Vijayakumar (Dentons Rodyk & Davidson LLP)
• Subject Matter: Civil Procedure,Appeals,Adducing fresh evidence on appeal
• Hearing Date: 24 May 2019

Steven Chong JA (delivering the grounds of decision of the court): Introduction

It would be stating the obvious that the quality of evidence adduced in any given case will have a material if not a critical bearing on its outcome. Cases are fought and more importantly decided on the basis of the evidence before the court. For this reason, the common law has developed rules and exceptions for the admission of fresh evidence following a trial or a hearing on the merits in order to balance the importance of finality in litigation and the proper and fair administration of justice.

Not infrequently, applications to introduce new evidence take place following a change of counsel. New arguments are raised for the appeal and quite often, such new arguments require fresh evidence to be adduced. Even though such fresh evidence might have been reasonably available to the parties for the hearing below, it was overlooked simply because it was not relevant for the purposes of the arguments which were pursued below. The case before us was precisely one such case and the rule in Ladd v Marshall [1954] 1 WLR 1489 (“Ladd v Marshall”) was raised by the respondent to resist the admission of fresh evidence to mount a new argument for the purposes of the substantive appeal. The key question before us was whether the Ladd v Marshall requirements should be strictly applied in the context of a winding-up order that was made pursuant to a statutory demand.

We heard and allowed the application on 24 May 2019 with brief oral grounds. In our view, the rule in Ladd v Marshall is to be applied contextually especially in circumstances such as the present case where there has been no trial and where there is potentially a dramatic difference in the balance of prejudice depending on the admission or exclusion of the fresh evidence. In such a situation, the fact that the evidence could have been adduced before the judge should not foreclose the grant of leave to adduce it for the purposes of the appeal. We also stated that we would issue detailed grounds in due course to fully explain our decision and to reconcile the different approaches to the application of the rule in Ladd v Marshall under different contextual settings. This, we do now.

Background facts

It is necessary to set out the background facts that gave rise to the present application as the relevance of the new evidence sought to be adduced can only be properly appreciated in that context.

The relationship between the parties

The appellant in the substantive appeal and the applicant in this summons is Anan Group (Singapore) Pte Ltd (“Anan”), a Singapore holding company. The respondent in both the substantive appeal and this summons is VTB Bank (Public Joint Stock Company) (“VTB”), a state-owned Russian bank. On 3 November 2017, Anan and VTB entered into a global master repurchase agreement (“GMRA”) under which Anan would sell VTB global depository receipts (“GDRs”) of shares in EN+ Group PLC (“EN+”) and then repurchase the GDRs from VTB at a later date at pre-agreed rates. The pre-agreed rates that Anan would need to pay VTB at the date of repurchase amounted in essence to the original purchase price paid by VTB plus interests and other costs. Thus, it was clear that despite the structure of the transaction as a sale and repurchase, this was in substance a loan from VTB to Anan.

Under this arrangement and according to the GMRA, Anan was under an obligation to maintain sufficient collateral, with the level of collateral being measured by an indicator known as the Repo Ratio. The Repo Ratio is calculated based on the purchase price of the GDRs under the GMRA plus accrued interest, divided by the prevailing value of the GDRs.¹ Under the GMRA, Anan was required to maintain the Repo Ratio at a level below what is known as the Margin Trigger Repo Ratio of 60%, failing which VTB could exercise its contractual right to call on Anan to top up the amount of collateral.² Anan was also under an obligation to maintain the Repo Ratio at a level below what is known as the Liquidation Repo Ratio of 75%. The calculation of whether the Repo Ratio rises above the Margin Trigger Repo Ratio of 60% or whether it rises above the Liquidation Repo Ratio of 75% differs slightly in that the latter takes into account various additional costs. Failure to top up the requisite amount of collateral when the Repo Ratio rises above the Margin Trigger Repo Ratio of 60% constitutes an event of default under the GMRA,³ as does the situation where the Repo Ratio rises above the Liquidation Repo Ratio of 75%.⁴

Pursuant to the GMRA, Anan sold VTB 35,714,295 EN+ GDRs for approximately US$250m, at which time EN+ shares were worth approximately US$13 per share. A few months later, on 6 April 2018, EN+ shares plummeted to about US$5.60 per share as a result of sanctions imposed on major shareholders of EN+ by the United States Treasury’s Office of Foreign Assets Control (“the OFAC sanctions”). On the same day as the OFAC sanctions (ie, 6 April 2018), VTB issued a margin trigger event notice, informing Anan that the Repo Ratio was at approximately 74.57%, thus exceeding the Margin Trigger Repo Ratio of 60%. In this notice, VTB asked Anan to top up a cash margin of approximately US$85m by 10 April 2018 purportedly in accordance with cl 2(a) of the GMRA.⁵ Anan failed to restore its collateral by transferring the cash margin within the stipulated timeframe.

On 12 April 2018, VTB sent a default notice to Anan, designating 16 April 2018 as the early termination date of the GMRA. According to this notice, two events of default had occurred – first, the Repo Ratio had exceeded the Liquidation Repo Ratio of 75%, thus constituting a liquidation event and an event of default under the GMRA; second, the Repo Ratio had exceeded the Margin Trigger Repo Ratio of 60% and Anan had failed to top up a cash margin of US$85m by 10 April 2018 as stipulated, and this constituted a further event of default under the GMRA.⁶

The legal effect of an early termination under the GMRA was that the repurchase date was brought forward to the early termination date, such that Anan was required to repurchase the GDRs at the original purchase price plus accrued interests to this date.⁷ In other words, Anan was compelled to repay the “loan” to VTB on the early termination date. What then occurs in such a case is a setting-off of the payments owed by each party, which the non-defaulting party is entitled to calculate.

On 24 April 2018, VTB as the non-defaulting party sent a calculation notice to Anan stating that an outstanding debt of some US$170m was owing. This sum was arrived at by calculating the outstanding amount owed (ie, the purchase price plus interests), minus the total value of the GDRs held by VTB, which VTB ascertained to be worth US$2.50 each. VTB had arrived at the figure of US$2.50 by calling for quotations from 14 institutions, of which only two responded with indicative quotes of US$1 and US$5. VTB then purported to take an arithmetic mean of the two quotations to arrive at the valuation of US$2.50 per GDR.⁸ It would be self-evident that this arithmetic average was erroneous. The average of US$1 and US$5 is US$3 and not US$2.50, though it would appear that this error might not be crucial for present purposes.

On 23 July 2018, VTB served a statutory demand for the sum of approximately US$170m, which sum Anan failed to repay within the three- weeks period. This statutory demand then formed the basis of the winding-up petition, HC/CWU 183/2018 (“CWU 183”), presented by VTB against Anan.

The proceedings below and the substantive appeal in CA 174

CWU 183 was presented by VTB on 17 August 2018. At the hearing of CWU 183 on 7 September 2018, Anan disputed the debt owed to VTB, arguing that the OFAC sanctions which caused the value of the GDRs to fall was an act of frustration as well as a force majeure event. Anan also argued in the alternative that the quantification of the debt of US$170m was erroneous, but this appeared to be a bare assertion focused largely on VTB’s unsubstantiated calculations of “hedge unwind costs”, “appropriate market”, “net value” and the interest rate used.⁹

The High Court judge (“the Judge”) granted the application in CWU 183 and ordered Anan to be wound up (see, VTB Bank (Public Joint Stock Co) v Anan Group (Singapore) Pte Ltd [2018] SGHC 250). The main point of contention in that hearing centred on the applicable standard of proof of a disputed debt when that debt is subject to an arbitration agreement between the parties. As this issue is anticipated to take centre stage in the substantive appeal in CA/CA 174/2018 (“CA 174”), we shall say no more of the matter here. The Judge found Anan’s arguments on frustration and force majeure to be unconvincing. The Judge also found that Anan had deliberately failed to particularise its case on the issue of the quantification of the debt, because it knew that in any case a substantial debt far in excess of the statutory insolvency threshold of $10,000 would be owing and that this debt would provide a sufficient basis for the granting of a winding-up order.¹⁰ We should add that Anan is no longer pursuing the frustration and force majeure arguments for the purposes of the appeal.

The substantive appeal in CA 174 thus focuses on two issues: first, the applicable standard of proof where a debt governed by an arbitration agreement is disputed; second, whether this standard of proof is met in the instant case given the dispute over the quantum of debt owed by Anan to VTB.

The present application was filed by Anan to adduce new evidence for CA 174 in the form of the affidavit of Andrew Ooi Lih De dated 22 March 2019 which exhibited a report prepared by Deloitte (the “Deloitte Report”). The Deloitte Report opines that the GDRs ought to have been valued at between US$8.01 and US$8.68 each as at the early termination date of...