Astrata (Singapore) Pte Ltd v Portcullis Escrow Pte Ltd

• Jurisdiction: Singapore
• Judge: Chan Sek Keong CJ
• Judgment Date: 29 April 2011
• Neutral Citation: [2011] SGCA 20
• Year: 2011
• Date: 29 April 2011
• Published date: 09 May 2011
• Hearing Date: 30 November 2010
• Plaintiff Counsel: Andy Leck, Gerald Kuppusamy, Fong Lee Cheng and Shaun Lee (Wong & Leow LLC)
• Citation: [2011] SGCA 20
• Defendant Counsel: Davinder Singh SC, Jaikanth Shankar and Zhuo Jiaxiang (Drew & Napier LLC),Ronald Choo and Ang Siok Hoon (Rajah & Tann LLP)
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeals Nos 158 and 159 of 2010; Originating Summons No 1082 of 2010

Chan Sek Keong CJ (delivering the judgment of the court):

There are before us two appeals and an application for leave to appeal by Astrata (Singapore) Pte Ltd (“Astrata”) against the decisions of the Judge (“the Judge”) in, respectively, Originating Summons No 171 of 2010 (“the Injunction Application”), Originating Summons No 690 of 2010 (“the Declaration Application”) and Summons No 3264 of 2010 (“the Stay Application”).

The respondents in the proceedings before us are Tridex Technologies Pte Ltd (“Tridex”) and Portcullis Escrow Pte Ltd (“PEPL”). The judgment in respect of the two appeals is reported in Astrata (Singapore) Pte Ltd v Tridex Technologies Pte Ltd and another and other matters [2011] 1 SLR 449 (“the Judgment”). The judgment from which the application for leave to appeal is made in Originating Summons No 1082 of 2010 (“the Leave Application”) is reported in Portcullis Escrow Pte Ltd v Astrata (Singapore) Pte Ltd and another [2010] SGHC 302.

Background

Astrata is a company incorporated in Singapore and is part of the Astrata group of companies, of which the ultimate holding company is Astrata Group Incorporated (“AGI”), a company incorporated in Nevada, USA. Astrata is in the business of designing and developing advanced location-based information technology services and solutions that combine global positioning systems, wireless communication (satellite or terrestrial) and geographical information technology. These solutions enable businesses, institutions and governments to monitor, trace and control the movement and status of machinery vehicles, personnel or other assets.

In a Supply Agreement dated 10 April 2007 (“the Supply Agreement”), Astrata agreed to develop and supply an electronic plate system to Tridex. The Supply Agreement was defined as comprising the Supply Agreement itself and any Points of Agreement (“PoA”) between Astrata and Tridex, of which 12 were eventually executed. The Supply Agreement provided for arbitration with respect to any disputes between the parties.

Pursuant to PoA #7 dated 10 October 2007, Astrata, Tridex and PEPL entered into a tripartite Escrow Agreement (“the Escrow Agreement”) on 23 October 2007. The Escrow Agreement designated PEPL as the Escrow Agent to hold in escrow the Comprehensive Source Code and the Comprehensive Engineering Diagrams (collectively “the Escrow Property”) which Astrata was required to deliver to Tridex under the Supply Agreement. The Escrow Agreement also stipulated in cll 7(i)(c) and 7(ii)(b) a list of events on the occurrence of any of which PEPL was obliged to release the Escrow Property to Tridex (the “triggering events” or a “triggering event”, as the case may be). We will refer to these contractual arrangements in more detail later.

How disputes came about

Disagreements developed between Astrata and Tridex under the Supply Agreement and the Escrow Agreement. The dispute surfaced after AGI sought Chapter 11 reorganisation under the United States Bankruptcy Code on 6 August 2009, after a failed voluntary restructuring proposal. Its final Reorganisation Plan (“the Reorganisation Plan”) was confirmed by the competent United States court on 15 December 2009 and became effective on 4 January 2010 (“AGI’s Chapter 11”). AGI’s Chapter 11 resulted in a change of shareholder control of AGI and is now controlled by a new shareholder called Fame Trading Ltd holding 94.5% of the shares in AGI.¹

On 5 February 2010, Tridex purported to terminate the Supply Agreement on the ground that Astrata had breached its obligations under the Supply Agreement. On the same day, Tridex wrote to PEPL stating that it was invoking its rights under the Escrow Agreement on the ground that a triggering event in cl 7(i)(c) had occurred, viz, AGI’s Chapter 11 which in Tridex’s view constituted an arrangement for the benefit of AGI’s creditors. Tridex further notified PEPL that it would call for the delivery of the Comprehensive Source Code at the appropriate time.

Astrata objected to Tridex’s claim that AGI’s Chapter 11 was a triggering event, and in a letter dated 9 February 2010, instructed PEPL not to release the Escrow Property as AGI’s scheme of arrangement was “for the purpose of a genuine amalgamation or reconstruction” (as per the language in cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement: see also [11] below). In this judgment, we shall refer to this dispute as “the Bilateral Dispute”. In the same letter, Astrata also sought confirmation from PEPL that it had not delivered the Escrow Property to Tridex. When Astrata did not receive any response from PEPL, Astrata filed the Injunction Application to restrain (a) Tridex from requiring PEPL to deliver the Escrow Property, and (b) PEPL from delivering the Escrow Property, pending the determination of the Bilateral Dispute by an arbitral tribunal under the Supply Agreement.

PEPL responded by filing an interpleader summons which it later withdrew in order to file the Declaration Application (which also included interpleader relief). The declaration sought was whether “the conditions in cl 7(i)(c) and cl 7(ii)(b) had been satisfied”, ie, any triggering event had occurred, thereby entitling PEPL to release the Escrow Property to Tridex. In response to the filing of the Declaration Application, Astrata filed the Stay Application pursuant to s 11A of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) to stay the hearing of the Declaration Application until the Bilateral Dispute has been determined by an arbitral tribunal to be appointed under the Supply Agreement.

Material issues in this case

In this judgment, instead of discussing the Judge’s decisions and his reasoning with reference to the Injunction Application, the Stay Application or the Declaration Application, we shall only consider the two material issues that have arisen from the facts of this case. The first (under Civil Appeal No 158 of 2010) is whether the Bilateral Dispute is subject to cl 29.1 (the arbitration clause) in the Supply Agreement (“the Jurisdiction Issue”). If the Bilateral Dispute is referable to arbitration, the second issue (under Civil Appeal No 159 of 2010) will not arise and the proceedings in this case will be stayed pending the outcome of the arbitration which Astrata has already initiated under cl 29.1 of the Supply Agreement. If the Bilateral Dispute is not referable to arbitration, however, the second issue arises as to whether AGI’s Chapter 11 is a triggering event under cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement (“the Substantive Issue”). If the Substantive Issue is decided against Astrata, Tridex would be entitled to call for delivery of the Escrow Property from PEPL. Conversely, if the Substantive Issue is decided in Astrata’s favour, Tridex would not be entitled to delivery of the Escrow Property. Accordingly, the disposition of Astrata’s application in Originating Summons No 1082 of 2010, for leave to appeal against the Judge’s declaration in the Judgment that cll 7(i)(c) and 7(ii)(b) had been satisfied on the facts (viz, the Leave Application), would hinge on the outcome of the Substantive Issue.

With respect to the Jurisdictional Issue, the Judge held that the Bilateral Dispute was not referable to arbitration under the Supply Agreement, and accordingly dismissed both the Injunction Application and the Stay Application. With respect to the Substantive Issue, the Judge proceeded on the basis that AGI’s Chapter 11 was an arrangement for the benefit of creditors and held that it constituted a triggering event under cll 7(i)(c) and 7(ii)(b) of the Escrow Agreement because (a) the saving clause “save for the purpose of a genuine amalgamation or reconstruction” (“the Saving Clause”) did not apply to that triggering event, but that even if it did, (b) AGI’s Chapter 11 was not a “reconstruction” for the purposes of the Saving Clause. We shall examine first the Jurisdictional Issue as it is logically prior to the Substantive Issue.

The Jurisdictional Issue

The material provisions pertaining to the Jurisdictional Issue are found in cll 21.1 and 29.1 of the Supply Agreement, PoA #7 and cll 7, 18 and 20(c) of the Escrow Agreement.

Clause 21.1 of the Supply Agreement (which contains the entire agreement clause) provides as follows:

Subject to the [PoAs] which have been executed and shall be executed between [Tridex] on one hand and [AGI] and [Astrata] on the other in relation to this Supply Agreement, this Supply Agreement constitutes the entire agreement between the Parties in relation to the subject matter herein, and supersedes all prior representations, agreements, statements and understandings, whether verbal or in writing.

Clause 29.1 (which contains the arbitration agreement between Astrata and Tridex) provides as follows:

If there is a dispute relating to any claim or controversy arising out of, or in connection with this Supply Agreement, including any question regarding its formation, existence, validity, enforceability, performance, interpretation, breach, or termination (the “Dispute”) ... then the Dispute may at the election of either Party be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said Rules.

PoA #7 contains the parties’ agreement to put the Escrow Property into escrow, to be released to Tridex upon the occurrence of any of the triggering events. Clause 1(v)(c) of PoA #7 provides that the Comprehensive Source Code kept by (the nominated escrow agent):

1) … shall be:

v) released to Tridex ...

c) If [Astrata] and/or [AGI] (but not any of its subsidiaries or associates other than Astrata (Asia Pacific) Pte Ltd or [Astrata]) (hereinafter singularly or collectively referred to as “ASAG”) ceases or threatens to cease to carry on its business; if a receiver, administrator or similar officer is appointed over all or any part...