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

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 26 February 2014
• Neutral Citation: [2014] SGCA 14
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 45 of 2013
• Published date: 02 May 2014
• Year: 2014
• Hearing Date: 25 November 2013
• Plaintiff Counsel: Sim Kwan Kiat and Ang Siok Chen (Rajah & Tann LLP)
• Defendant Counsel: Goh Yeow Kiang Victor (liquidator-in-person),Beverly Wee, Christopher Eng and Pruetihipunthu Tris Xavier (Official Receiver's Office),Bala Chandran s/o A Kandiah (Mallal & Namazie),Professor Yeo Tiong Min SC as amicus curiae.
• Subject Matter: Insolvency Law
• Citation: [2014] SGCA 14

Sundaresh Menon CJ (delivering the grounds of decision of the court):

This was an appeal against parts of the decision of the learned Judicial Commissioner (“the Judge”) in Summons No 3435 of 2012 (“SUM 3435/2012”). The first appellant, a company incorporated in Germany, went into liquidation. It had certain assets in Singapore though the Judge found that it did not carry on business here. The central issue was whether its Singapore assets were to be remitted to the liquidators in Germany or whether they should be held to satisfy the claims of creditors in Singapore. The answer to this depended in large part on whether s 377(3)(c) of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) applies to a foreign company that is in liquidation, even where it is not registered under s 368 of the Act and has not established a place of business or carried on business here. Section 377(3)(c) establishes a scheme for any local assets to be applied first to satisfy debts and liabilities incurred in Singapore before any residual amount is remitted to the foreign liquidator. The Judge held that s 377(3)(c) applied to the first appellant and ordered that the company’s assets be applied towards the payment of a judgment debt incurred in Singapore. The Judge’s decision is reported as Beluga Chartering GmbH (in liquidation) v Beluga Projects (Singapore) Pte Ltd (in liquidation) and another (Deugro (Singapore) Pte Ltd, non-party) [2013] 2 SLR 1035 (“the GD”)

After hearing the parties and the amicus curiae Professor Yeo Tiong Min SC (“Prof Yeo”), we allowed the appeal and held that s 377(3)(c) did not apply to a foreign company such as the first appellant, which was not registered under the Act and did not carry on business or have a place of business here. We ordered that its assets in Singapore be remitted to its liquidators in Germany. We now give the reasons for our decision.

Background facts

The facts are comprehensively set out in the GD, and we summarise only the material background facts to the extent they help in providing the context for the legal issues discussed in these grounds.

The parties to the dispute

The first appellant, Beluga Chartering GmbH (in liquidation) (“Beluga Chartering”), is a company incorporated under the laws of Germany. It was the ship chartering arm of the Beluga group of companies (“the Beluga Group”). Mr Chee Yoh Chuang and Mr Abuthahir Abdul Gafoor, who are the Singapore liquidators of Beluga Chartering, are the second and third appellants (see further at [12] below). We refer to them in these grounds as “the Singapore Liquidators”.

The respondents, Beluga Projects (Singapore) Pte Ltd (“Beluga Singapore”) and Beluga Chartering Asia Pte Ltd (“Beluga Asia”) (hereafter referred to collectively as “the Singapore Subsidiaries”), are companies incorporated in Singapore and are wholly owned subsidiaries of Beluga Chartering.

Beluga Singapore acted as Beluga Chartering’s exclusive mercantile agent for Southeast Asia and Western Australia. Beluga Asia acted as Beluga Chartering’s exclusive shipping agent. Beluga Chartering financed the setting up and operations of the Singapore Subsidiaries.

The non-party, deugro (Singapore) Pte Ltd (“deugro Singapore”), is a company incorporated in Singapore. deugro Singapore owed Beluga Chartering $1,587,294.31 (“the deugro Debt”). Part of this sum was for work done by the Singapore Subsidiaries on behalf of Beluga Chartering. The deugro Debt is Beluga Chartering’s only asset in Singapore.¹ Beluga Chartering in turn owed deugro Singapore €502,600 (“the deugro Liability”). This debt arose out of a contractual obligation owed by Beluga Chartering to deugro Danmark A/S (“deugro Denmark”) to perform five voyages from Vietnam to Scotland pursuant to a booking note dated 5 January 2011. Beluga Chartering was unable to perform four of the five voyages as a result of which deugro Denmark claimed to have suffered damages amounting to €502,600. Upon Beluga Chartering informing deugro Denmark that it was unable to fulfil its remaining obligations due to pending insolvency proceedings, deugro Denmark invoiced Beluga Chartering for this amount and subsequently assigned this debt to deugro Singapore.²

The winding up proceedings

On 16 March 2011, the Insolvency Court of the Bremen District Court placed Beluga Chartering into liquidation. Mr Edgar Grönda (“the German Liquidator”) was subsequently appointed as Beluga Chartering’s permanent insolvency administrator.³

On 31 March 2011, the Singapore Subsidiaries filed a writ of summons in Suit No 227 of 2011 seeking a sum of $1,415,631.21 for agency work performed for Beluga Chartering. Judgment in default was entered against Beluga Chartering on 20 April 2011.

The Singapore Subsidiaries obtained an injunction against Beluga Chartering on 1 April 2011 prohibiting Beluga Chartering from dealing with or disposing of its assets in Singapore up to the value of $1,415,631.21. The injunction was still in effect when we heard this appeal.

On 2 September 2011, a winding up order was made against Beluga Asia and the Official Receiver was appointed as the liquidator.⁴ On 13 January 2012, a winding up order was made against Beluga Singapore. Mr Sim Guan Seng and Mr Goh Yeow Kiang Victor (“Mr Goh”) of Baker Tilly TFW LLP were appointed as the liquidators.⁵

On 17 January 2012, Beluga Shipping GmbH & Co KG Ms “Beluga Persuasion”, a German creditor of Beluga Chartering, filed Companies Winding Up No 5 of 2012 (“CWU 5/2012”) in the Singapore High Court for a winding up order against Beluga Chartering on the grounds that Beluga Chartering was unable to pay its debts and that it was just and equitable for Beluga Chartering to be wound up as the Singapore Subsidiaries would otherwise be paid in preference to the other creditors of the company. On 17 February 2012, the High Court made an order winding up Beluga Chartering and appointed the Singapore Liquidators.

deugro Singapore agreed to pay the Singapore Liquidators the sum of US$849,647.42 in full settlement of deugro Singapore’s liability to Beluga Chartering (“the deugro Asset”). It then took the position that the settlement put an end to issues of set-off and mutuality of the deugro Debt and the deugro Liability.

The summons for determination of questions

The Singapore Liquidators subsequently filed SUM 3435/2012 pursuant to s 273(3) of the Act for the determination of the following questions of law (“the Questions”): (1) Whether the provisions of Part X of the Companies Act (Cap. 50) (“Part X”), in particular section 350(2) of the Companies Act (Cap. 50), apply to [Beluga Chartering] and its joint and several liquidators in Singapore without exception or modification, such that the joint and several liquidators are required to comply with Part X in carrying out their duties as liquidators of [Beluga Chartering]. (2) Subject to the determination of issue (1), whether the joint and several liquidators of [Beluga Chartering] in Singapore have the power, under Part X or general law, and are at liberty to repatriate [Beluga Chartering’s] assets in Singapore to [Beluga Chartering’s] German Insolvency Administrator (or elsewhere as directed by the German Insolvency Administrator or his authorised representatives), to be administered in accordance with German law, notwithstanding the existence of unsatisfied judgment debts against [Beluga Chartering] incurred in Singapore.

The 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, to be dealt with in accordance with German insolvency law. The Singapore Subsidiaries opposed the application. Mr Goh (who appeared in person) attended on behalf of Beluga Asia and the Official Receiver represented Beluga Singapore. Mr Goh aligned himself fully with the Official Receiver’s submissions both below and before us on appeal and we do not differentiate between the respondents in these grounds. deugro Singapore took no position on the application.

The decision below

The Judge first considered whether s 377(3)(c) applied to Beluga Chartering. Section 377(3)(c) imposes obligations on a Singapore liquidator to realise and recover assets in Singapore and pay any debts and satisfy any liabilities incurred here by the foreign company before remitting the net recovery to the foreign liquidator. This framework, which preserves assets in Singapore for the purpose of meeting claims here, was referred to as “the ring-fencing provision”. The Judge concluded (at [103] of the GD) that s 377(3)(c) did apply to Beluga Chartering and his reasoning is more fully discussed below.

As s 377(3)(c) was found to apply to Beluga Chartering, the Singapore Liquidators would have to apply its assets in Singapore first to meet liabilities here unless the court had a common law power to disapply that statutory provision (at [175] of the GD). The Judge discussed the English case law on the scope of the common law ancillary liquidation doctrine and concluded that under that doctrine he did have a discretion to disapply aspects of the statutory insolvency regime and, in effect, to order the remission of assets to the liquidator in the home jurisdiction of the company notwithstanding s 377(3)(c) (at [219] of the GD).

The Judge then analysed the facts in some detail to decide how he should exercise his discretion. He held that Beluga Chartering was not carrying on business in Singapore (at [307] of the GD) but observed that it “came as close as a foreign company [could] to doing so without actually doing so” (at [314] of the GD). Although the Judge accepted that the usual course in the case of a foreign company which did not carry on business in Singapore would be to exercise the discretion by disapplying the ring-fencing provision (at [313] of the GD), he found that the Singapore Subsidiaries would suffer real...