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

JurisdictionSingapore
Judgment Date12 March 2013
Date12 March 2013
Docket NumberCompanies Winding Up No 5 of 2012 (Summons No 3435 of 2012)
CourtHigh Court (Singapore)
Beluga Chartering Gmb H (in liquidation)
Plaintiff
and
Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (Deugro (Singapore) Pte Ltd, non-party)
Defendant

[2013] SGHC 60

Vinodh Coomaraswamy JC

Companies Winding Up No 5 of 2012 (Summons No 3435 of 2012)

High Court

Insolvency Law—Cross-border insolvency—Repatriation of assets—Whether Singapore liquidators had power to transmit proceeds realised in Singapore liquidation of foreign company to principal liquidation in foreign country for pari passu distribution amongst worldwide creditors—Whether Singapore liquidators were bound by ring-fencing obligation under s 377 (3) (c) Companies Act (Cap 50, 2006 Rev Ed)—Section 377 (3) (c) Companies Act (Cap 50, 2006 Rev Ed)

Insolvency Law—Cross-border insolvency—Winding up of foreign companies—Whether ancillary liquidation doctrine was part of Singapore insolvency scheme—Whether Divs 1, 2, 4 and 5 of Pt X of Companies Act (Cap 50, 2006 Rev Ed) envisioned ancillary liquidation doctrine—Divisions 1, 2, 4 and 5 of Pt X of Companies Act (Cap 50, 2006 Rev Ed)

Beluga Chartering Gmb H (‘Beluga Chartering’) was a company incorporated in Germany. It had two wholly-owned subsidiaries incorporated in Singapore (‘Singapore Subsidiaries’). Beluga Chartering bore all the operational costs and expenses for the Singapore Subsidiaries from the time of their incorporation.

Winding up proceedings of Beluga Chartering were commenced in Germany on 1 June 2011. On 17 February 2012, the High Court in Singapore wound Beluga Chartering up under Div 5 of Pt X of the Companies Act (Cap 50, 2006 Rev Ed) (‘the Act’) on grounds of insolvency. Two Singapore liquidators were appointed (‘the Singapore Liquidators’). At the time of the winding up, Beluga Chartering's only known asset in Singapore was a sum of US $1,259,647.42. This sum represented a debt of due from a company known as deugro Singapore Pte Ltd to Beluga Chartering (‘deugro Asset’). Beluga Chartering also owed a debt of €502,600 to a Danish company within the same group as deugro Singapore (‘deugro Liability’). The deugro Liability was later assigned to deugro Singapore in a bid to set it off against the deugro Asset.

On 31 March 2011, the Singapore Subsidiaries as joint plaintiffs sued Beluga Chartering for a sum of S$1,415,631.21, representing work done by each of the Singapore Subsidiaries on behalf of Beluga Chartering. The Singapore Subsidiaries secured judgment in default of appearance for the total sum prayed for. In order to ensure that the judgment debt could be satisfied, the Singapore Subsidiaries then sought and obtained from the High Court an injunction prohibiting Beluga Chartering from disposing of its assets in Singapore, including the deugro Asset, up to the sum of the judgment debt (‘the Injunction’). At the same time, the Singapore Subsidiaries obtained a Garnishee Order in respect of the deugro Asset. The Garnishee Order was never made final because it was discharged upon the winding up of Beluga Chartering in Singapore.

With funding from Beluga Chartering cut, the Singapore Subsidiaries were unable to pay their expenses and debts, which included salaries and CPF contributions for their employees in Singapore. The unadjudicated claims against the Singapore Subsidiaries totalled S$1,227,873. Both Singapore Subsidiaries were eventually placed in creditors' voluntary liquidation in September 2011 and January 2012 respectively.

The Singapore Liquidators applied under s 273 (3) of the Act, seeking directions from the High Court permitting them to transmit the deugro Asset, after setting-off the deugro Liability, to the German liquidator (‘the German Liquidator’) for distribution to Beluga Chartering's worldwide creditors in a single insolvency governed by German law. Specifically, the Singapore Liquidators sought the High Court's determination of two questions of law: (a)whether the provisions of Pt X of the Act applied to Beluga Chartering and its Singapore Liquidators without exception or modification, such that the Singapore Liquidators were required to comply with Pt X in the carrying out of their duties; and (b)subject to the determination of issue (a), whether the Singapore Liquidators had the power, either under Pt X of the Act or the general law, to repatriate Beluga Chartering's assets in Singapore to the German Liquidator, to be administered in accordance with German law, notwithstanding the existence of unsatisfied judgment debts against Beluga Chartering incurred in Singapore. The Singapore Liquidators also sought an order directing the discharge of the Injunction such that the deugro Asset could be applied to the payments ordered by the High Court pursuant to the liquidation in Singapore.

Held, answering the first question in the affirmative and stating, in respect of the second question, that the Singapore Liquidators have an obligation under s 377 (3) (c)of the Act to repatriate Beluga Chartering's assets in Singapore to the German Liquidator, subject to the qualifications in that section:

(1) Singapore's statutory insolvency scheme derived many fundamental features from English legislation and common law. This included the English common law principle of ancillary liquidation. The ancillary liquidation doctrine was introduced into Singapore law in 1926 and remained a part of Singapore's insolvency scheme as confirmed in RBG Resources plc v Credit Lyonnais[2006] 1 SLR (R) 240 (‘RBG’): at [41] .

(2) Divisions 1, 2 and 4 of Pt X of the Act envisioned every Singapore liquidator of a Singapore company to be a worldwide liquidator with worldwide duties and powers. Likewise, Div 5 of Pt X of the Act envisioned the Singapore liquidation of a foreign company to be the only liquidation. None of these divisions expressly or impliedly enacted the ancillary liquidation doctrine, restricted the territorial scope of the liquidator's duties, or provided a mechanism for determining whether, when and to what extent the Singapore liquidator would prevail over or defer to any ancillary foreign liquidator of either the Singapore or foreign company: at [68] , [69] and [80] to [83] .

(3) Division 5 of Pt X of the Act governed the winding up of every foreign company, regardless of whether it was carrying on business in Singapore, had a place of business in Singapore, or had registered under s 368 of the Act. The relevant registration which removed a legal entity from the scope of the term ‘unregistered company’ used in s 350 (1) of the Act was registration under s 19 (3) of the Act and not registration under s 368 of the Act: at [86] .

(4) Unlike the provisions in Divs 1, 2, 4 and 5 of Pt X of the Act, s 377 (3) (c)of the Act envisaged the ancillary liquidation doctrine. The first limb placed a specific territorial limit on the Singapore liquidator of a foreign company, thereby reversing the unstated worldwide nature of every liquidation under Pt X of the Act. The second limb obliged the Singapore liquidator to transmit the Singapore proceeds to the principal liquidator in the foreign company's place of incorporation subject to the ring-fencing of such proceeds for the benefit of local creditors. The third limb ring-fenced assets located in Singapore for the payment of debts incurred in Singapore by a foreign company. It was a wholly novel provision and had no equivalent in English or Australian legislation, or in the common law: at [95] to [98] .

(5) The legislative history and construction of s 350 (2) of the Act showed that the use of the word ‘companies’ in that section was intended to refer to ‘legal persons’ and not only ‘Singapore companies’ as defined in s 4 (1) of the Act. Section 350 (2) also did not operate to exclude provisions which fell outside its scope from applying to a liquidation under Div 5 of Pt X of the Act. Therefore, s 350 (2) of the Act did not operate to preclude the application of provisions such as s 377 (3) (c) of the Act, which applied only to foreign companies and not Singapore companies: at [112] to [114] , [116] and [117] .

(6) Section 365 of the Act was not to be interpreted as a condition precedent for the application of Div 2 of Pt XI. Doing so created circularity and created a loophole which could not have been intended by legislature, in that it exempted foreign companies which carried on business in Singapore but which breached their obligation to register under s 368, from compliance with all the provisions under Div 2 of Pt XI of the Act. The practical solution to this difficulty as provided in RBG did not fully address the problem of circularity and under-inclusiveness. A broad interpretation of s 365 such that it covered all foreign companies, was consistent with the legislative history and the drafting conventions of the Act: at [122] , [123] , [125] and [146] to [148]

(7) The overinclusiveness of s 377 which resulted from reading s 365 such that it was not a condition precedent, was addressed by the insolvency court's exercise of its discretion in declining to wind up a foreign company in Singapore if it did not have a sufficient connection with Singapore, or by disapplying Singapore insolvency law as far as was consistent with justice and public policy: at [150] and [151] .

(8) The pari passu principle was not sacrosanct in any mature insolvency scheme. It was riven with de facto and express exceptions such as the prior payment of preferential creditors, the operation of insolvency set-off, the possibility of court-sanctioned departures from the pari passu principle, and express exceptions such as priority schemes found in statutes other than the Act. The ring-fencing provided in s 377 (3) (c) was but one of the many statutory exceptions to the pari passu principle and was a legislative decision based on valid policy considerations: at [160] to [165] and [168] to [171] .

(9) Lord Hoffman's view in Re HIH Casualty and General Insurance Ltd; Mc Grath v Riddell[2008] 1 WLR 852...

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4 cases
2 books & journal articles
  • CROSS-BORDER INSOLVENCY AND ITS IMPACT ON ARBITRATION
    • Singapore
    • Singapore Academy of Law Journal No. 2014, December 2014
    • 1 Diciembre 2014
    ...v Beluga Projects (Singapore) Pte Ltd[2014] 2 SLR 815 at [87]. 70 For example, s 227B(2) of the Companies Act (Cap 50, 2006 Rev Ed). 71[2013] 2 SLR 1035 at [66]. See also Ian Fletcher, The Law of Insolvency (Sweet & Maxwell, 4th Ed, 2009) at para 30–042, where the learned author said: As a ......
  • Insolvency Law
    • Singapore
    • Singapore Academy of Law Annual Review No. 2013, December 2013
    • 1 Diciembre 2013
    ...733 (on the nature of the statutory trust when a company is wound up); and Beluga Chartering GmbH v Beluga Projects (Singapore) Pte Ltd[2013] 2 SLR 1035 (HC), [2014] 2 SLR 815 (CA) (on cross-border insolvency). Bankruptcy Stay of proceedings 17.2 In Chimbusco International Petroleum (Singap......

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