Beluga Chartering Gmb H v Beluga Projects (Singapore) Pte Ltd

• Judgment Date: 26 February 2014
• Date: 26 February 2014
• Docket Number: Civil Appeal No 45 of 2013
• Court: Court of Appeal (Singapore)

Beluga Chartering Gmb H (in liquidation) and others

Plaintiff

and

Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (deugro (Singapore) Pte Ltd, non-party)

Defendant

[2014] SGCA 14

Sundaresh Menon CJ

,

V K Rajah JA

and

Judith Prakash J

Civil Appeal No 45 of 2013

Court of Appeal

Insolvency Law—Cross-border insolvency—Remittal of assets—Common law ancillary liquidation doctrine—Scope of common law ancillary liquidation doctrine—Whether Singapore liquidators had common law power to remit assets in Singapore to foreign liquidators in principal liquidation

Insolvency Law—Cross-border insolvency—Ring-fencing of assets—Foreign company wound up in Singapore under Div 5 of Pt X Companies Act (Cap 50, 2006 Rev Ed) —Whether Singapore liquidators of foreign company bound by obligation under s 377 (3) (c) Companies Act to satisfy locally incurred debts and liabilities—Section 377 (3) (c) and Pt X Div 5 Companies Act (Cap 50, 2006 Rev Ed)

Statutory Interpretation—Construction of statute—Whether s 365 Companies Act (Cap 50, 2006 Rev Ed) was condition precedent for application of provisions in Div 2 of Pt XI Companies Act—Section 365 and Pt XI Div 2 Companies Act (Cap 50, 2006 Rev Ed)

The first appellant, Beluga Chartering Gmb H (in liquidation) (‘Beluga Chartering’), was a company incorporated in Germany. On 16 March 2011, a winding-up order was made against Beluga Chartering in Germany and a liquidator was appointed (‘the German Liquidator’). On 17 February 2012, the High Court made a winding-up order against Beluga Chartering in Singapore, and the second and third appellants were appointed as liquidators (‘the Singapore Liquidators’).

The first and second respondents were companies incorporated in Singapore and were wholly owned subsidiaries of Beluga Chartering (‘the Singapore Subsidiaries’). The Singapore Subsidiaries brought a claim against Beluga Chartering for the sum of $1,415,631.21 for agency work performed for Beluga Chartering and obtained judgment in default.

Beluga Chartering's only asset in Singapore was the sum of US$849,647.42 that was owed by the non-party deugro (Singapore) Pte Ltd to Beluga Chartering (‘the deugro Asset’). The Singapore Liquidators filed an application referring two questions of law pursuant to s 273 (3) of the Companies Act (Cap 50, 2006 Rev Ed) (‘the Act’). This application was filed to ascertain whether the Singapore Liquidators were entitled to remit the deugro Asset to the seat of the principal liquidation in Germany notwithstanding the existence of the Singapore Subsidiaries' unsatisfied judgment debt.

The High Court judge (‘the Judge’) held that the Singapore Liquidators were bound by s 377 (3) (c) of the Act, which imposed an obligation on a Singapore liquidator to realise and recover assets in Singapore and pay any debts and satisfy any liabilities incurred here before remitting the net recovery to the foreign liquidator. However, the Judge also accepted that the court had a discretion under the common law ancillary liquidation doctrine to disapply that statutory provision, but declined to exercise that discretion on the facts of the case. The Judge accordingly held that the Singapore Liquidators were obliged to pay the judgment debt owed to the Singapore Subsidiaries before remitting any remaining proceedings to the German Liquidator.

Beluga Chartering and the Singapore Liquidators appealed the part of the Judge's decision holding that the Singapore Liquidators were bound by s 377 (3) (c).

Held, allowing the appeal:

(1) Beluga Chartering had been wound up in Singapore under s 351 (1) of the Act, which was found in Div 5 of Pt X of the Act. The first limb of s 350 (2) of the Act provided that the provisions of Div 5 were ‘in addition to, and not in derogation of, any provisions contained in [the Act] or any written law with respect of the winding up of companies by the Court’, and the second limb provided that ‘the Court or the liquidator may exercise any power to do any act in the case of unregistered companies which might be exercised or done by it or him in winding up companies’: at [21] and [22] .

(2) The word ‘companies’ in s 350 (2) was to be read in accordance with the definition of ‘company’ in s 4 (1) - ‘a company incorporated pursuant to [the Act] ’ - and both uses of the word ‘companies’ in s 350 (2) should be given the same meaning. On a strict reading of s 350 (2), it was arguable that s 377 (3) (c) could not be imported pursuant to the second limb of s 350 (2) to apply to the winding up of an unregistered company under Div 5 as s 377 (3) (c) concerned foreign companies that were not incorporated under the Act. However, the first limb of s 350 (2) did not exclude the operation of provisions that might otherwise apply on an independent basis: at [28] , [29] and [31] .

(3) Section 377 (3) (c) was found in Div 2 of Pt XI of the Act, and s 365 stated that the ‘Division applies to a foreign company which, before it establishes a place of business or commences to carry on business in Singapore, complies with section 368 and is registered under this Division’. Section 368 in turn imposed an obligation on a foreign company to register before it established a place of business or commenced carrying on business in Singapore. The predecessor provision of s 368, s 332 of the Companies Act (Cap 50, 1967 Rev Ed), had required a foreign company to register within one month after establishing a place of business or commencing to carry on business: at [32] to [35] .

(4) The Judge had, after analysing the legislative history of s 365, concluded that s 365 could not be interpreted as a condition precedent for the application of the provisions in Div 2; s 365 merely described one of the classes of foreign companies to which the Division applied. Section 365 as originally enacted had provided that the Division applied to a foreign company ‘only if it [had] a place of business or [was] carrying on business in Singapore’. When s 365 was amended in 1987, there was no indication in the Parliamentary Debates or the Report of the Select Committee on the relevant bill that the amendment was driven by anything other than the specific objective of resolving the logical anomaly caused by the change in the required sequence of registration under s 368. The Judge's interpretation effected a substantial expansion of the ambit of Div 2, and it was implausible that Parliament would have effected such an important change through a side wind: at [35] , [38] and [39] .

(5) The literal words of s 365 gave rise to an analytical circularity as the obligation to register under s 368 could not be triggered by the condition precedent under s 365 unless the foreign company satisfied s 365 by complying with s 368. This reading also created an unanticipated practical loophole as a foreign company could escape its obligations simply by deliberately refraining from registering. However, the Judge's interpretation entailed the opposite consequence of overinclusiveness and gave rise to problems of extraterritoriality: at [41] , [42] , [44] and [46] .

(6) Although the drafting of s 365 was infelicitous, Parliament's intention could be given effect to through a purposive construction of the provision. Section 365 would therefore operate as a condition precedent for the application of all provisions in Div 2 of Pt XI save for s 368 and would be triggered when a foreign company (a) had been registered under s 368 (1) or (b) came under the liability to register under s 368 (1) because it intended to establish a place of business or commence carrying on business in Singapore, this being a continuing liability even after a place of business had been established or business had been commenced in Singapore without registration: at [49] and [52] .

(7) On the above interpretation of s 365, s 377 (3) (c) did not apply to Beluga Chartering as it was not obliged to register under s 368 (1). The Judge had made an unequivocal factual finding that Beluga Chartering never carried on business in Singapore and the respondents had not appealed against this finding: at [53] and [54] .

(8) The winding up of Beluga Chartering, which was an unregistered foreign company in Singapore, was governed by the provisions in Div 5 of Pt X; in the absence of any statutory provision dealing with the relationship between a foreign and local liquidator, the application to remit assets in Singapore to Germany had to be decided on the basis of the common law. The ancillary liquidation doctrine was historically entrenched as part of the common law and existed in Singapore alongside the statutory insolvency regime: at [55] , [58] and [60] .

(9) There were two contrasting approaches to the scope of the common law ancillary liquidation doctrine adopted in the House of Lords' decision in In re HIH Casualty and General Insurance Ltd[2008] 1 WLR 852. Lord Hoffmann thought that that courts had a common law discretion premised on the principle of modified universalism to order assets to be remitted to the liquidators of the principal liquidation regardless of any statutory provision, while Lord Scott thought that the courts had no common law discretion to disapply the statutory insolvency regime or deprive creditors of their statutory rights: at [73] .

(10) It was nevertheless clear on either approach that the ancillary liquidation doctrine would result in remittal of the Singapore assets to the German Liquidator. The only claim of the Singapore Subsidiaries to a statutory priority for the judgment debt was s 377 (3) (c) of the Act, which did not apply to the Singapore Liquidators, and there was no evidence that there would not be a pari passu distribution in Germany. On Lord Scott's approach, the remittal of assets would not entail the disapplication of a statutory insolvency provision or deprive the Singapore Subsidiaries of any vested statutory rights. On Lord Hoffmann's approach...